Canada’s ‘resilient’ economy means Bank of Canada needs to start hiking, economist says

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeNewsEconomyCanada's 'resilient' economy means Bank of Canada needs to start hiking, economist saysScotiabank's Derek Holt says economy proving more robust than the 'negative nellies' fearedLast updated 28 minutes ago Trucks cross into the United States on the Gordie Howe International bridge that connects Windsor, Ont., and Detroit, Mich. Canada's economy stalled in July but picked up in August. Photo by JEFF KOWALSKY / AFP via Getty ImagesCanada’s economy likely continued to grow in the third quarter, though economists say that growth could stall in the final quarter of the year as new United States tariffs bite.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountEconomists estimated the economy expanded by two per cent on an annualized basis in the third quarter, beating the Bank of Canada’s outlook for 1.5 per cent.Those calls came after Statistics Canada on Tuesday said gross domestic product in July was flat month over month, but expanded 0.2 per cent in August, according to a flash estimate. The agency also revised June’s GDP figure to 0.4 per cent from 0.3 per cent.This advertisement has not loaded yet, but your article continues below.Here’s what economists think the latest GDP data means for the economy, the Bank of Canada and interest rates.SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try again‘Much more resilient’: Bank of Nova Scotia“Canada’s economy is proving to be much more resilient in the third quarter than negative nellies feared after a strong second quarter that itself was revised to be stronger this morning,” Derek Holt, vice-president of Scotiabank Economics, said in a note.Statistics Canada boosted GDP’s second-quarter annualized growth to 3.8 per cent from 3.6 per cent.Holt estimates third-quarter GDP will now come in at two per cent annualized.Slack in the economy — what it is producing versus its capacity to produce — is tightening and “will likely close in 2027,” he said.Holt said inflation will likely “overwhelm” any remaining economic slack, which might force the Bank of Canada to start hiking interest rates.But he swept aside the threats posed by a new round of U.S. tariffs that took effect this month, saying U.S. President Donald Trump has gifted Canada high commodity prices and an “undervalued” Canadian dollar.Because interest rate changes take a while to filter through the economy, he is calling for the Bank of Canada to start hiking at its meeting on Oct. 28.This advertisement has not loaded yet, but your article continues below.“The Bank of Canada had better get on with it,” he said.‘Robust over the summer’: Charles St-Arnaud“Overall, the GDP number suggests the Canadian economy was robust over the summer,” Charles St-Arnaud, chief economist at Servus Credit Union, said in a note, but added that growth could slow in September due to the imposition of more tariffs by the U.S.He said growth isn’t the priority of the Bank of Canada, which is more concerned with rising inflation from higher oil prices and the risk that poses to the economy.“So far, there is no evidence the situation is causing broader inflationary pressure,” he said.That should allow the Bank of Canada to keep rates on hold for the rest of the year, he said, though the central bank could still pull the trigger and hike if inflation breaks free.‘Calm before the storm’: CIBC“Today’s data points to a slower, but still solid, pace of growth in the third quarter to follow the surge seen in the second quarter,” Andrew Grantham, a senior economist at CIBC Capital Markets, said in a note, adding that CIBC is calling for third-quarter growth of two per cent annualized.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.But he said the latest GDP results could represent the “calm before the storm” due to the new U.S. tariffs.He also said the flash GDP estimate for August by Statistics Canada could be flattering as businesses sought to front-run the new tariffs, which Trump first announced on July 20.Grantham said GDP could slow to less than one per cent annualized in the fourth quarter because of the tariffs and their impact on consumer and business confidence.CIBC is calling for the Bank of Canada to hold interest rates through the remainder of 2026 before hiking in early 2027.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. 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