We expect the Bank of Canada to cut its key policy rate by 25 basis points to 0.25% next week, which is much sooner than most investors anticipate. The incoming data suggest that the economy contracted in the final quarter of last year, and was therefore much weaker than the Bank’s forecast of a 1.5% annualised gain. Not only this, the further plunge in commodity prices – led by oil – over the past month or so has completely undermined prospects for economic growth this year.
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