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The disappearing case for rate increases

Considering the contraction in second-quarter GDP and evidence of slowing global economic growth and rising financial risks, it is not a surprise to anyone that the Bank of Canada kept its policy interest rate at 1%. More importantly, the Bank's policy statement provided a strong hint that interest rates will remain low for longer. We still believe that the policy rate will remain at 1% this year and next. Moreover, the possibility of rate cuts has clearly risen.

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