As the Bank noted, economic growth exceeded expectations in the second quarter. However, the economy looks far more pedestrian if averaged over the entire first half of 2014. Employment growth has been uneven and the Canadian unemployment rate remains stubbornly high. Therefore, the Bank is unlikely to be moved from its current stance after just one strong quarter of economic growth. We expect that the Bank will continue to take a cautious approach to monetary policy until it sees concrete signs that the economy is growing above trend. That means at least one more quarter of solid GDP growth paired with more steady employment gains, as well as similarly strong data in the United States. While the Bank left the door open to lower interest rates given its "neutral" stance, we still anticipate that the next move for interest rates will be upward, though not until 2015.
Copyright BCREA - reprinted with permission