While the economy gained momentum in the second quarter, we expect GDP growth to slow again in the second half of the year amid ongoing uncertainty around CUSMA negotiations. The combination of soft underlying activity and target-consistent core inflation should allow the Bank of Canada to keep its policy rate on hold this year. But as an agreement on CUSMA is reached and the economy starts to benefit more from the government’s infrastructure push, we expect GDP growth to pick up to 1.7% next year and for the Bank to raise its policy rate by 50bp to 2.75%.
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