BoC expected to cut key interest rate, despite stronger-than-anticipated growth in Q2

Economists say the Bank of Canada is still on track to cut interest rates next week, despite economic growth coming in stronger than expected in the second quarter.

Statistics Canada said on Friday the economy grew at an annualized rate of 2.1 per cent in the second quarter – beating the Bank of Canada’s forecast.

But real gross domestic product continued to shrink on a per-person basis, marking the fifth consecutive decline. Economists typically look at GDP per capita to assess the standard of living.

Overall economic growth also halted toward the end of the quarter as real gross domestic product was essentially unchanged for June. A preliminary estimate suggested the economy remained flat in July as well.

“Growth in the Canadian economy was modestly better than expected in Q2, but weak momentum heading into the third quarter gives ample reason for the BoC to continue cutting interest rates,” CIBC senior economist Andrew Grantham said in a client note.

The Bank of Canada’s next interest rate decision is set for Wednesday.