In this edition, we take a closer look at the outlook for inflation given the rise in vaccinations and upwardly revised growth forecasts. Canada’s inflation rate is expected to top 3% in Q2 then ease back toward the bank’s 2% target.
Theme 1: Inflation:
We are likely to see higher commodity prices combined with base effects from pandemic lows to push Canada’s headline inflation rate above 3% in Q2, before easing somewhat.
Theme 2: Bank of Canada:
Bond yields have risen as investors anticipate higher inflation. Inflation expectations have also picked up although remain anchored below the Bank’s 2% target.
Theme 3: Canadian GDP:
Our forecast is for Canada’s economy to grow 6.3% in 2021 with the output gap projected to close as early as in the first quarter of 2022.
As Deputy Chief Economist, Dawn contributes to the macroeconomic and interest rate forecasts for Canada and the U.S. Before joining RBC, Dawn worked as a reporter for Bloomberg Financial News in Toronto covering the Canadian bond and currency markets. She also spent ten years as the Canadian bond market strategist for a major U.S. bank.
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