Bank of Canada sticks with rate tightening bias

The Bank of Canada's decision to stick with its rate tightening bias, despite growing economic slack and below-target inflation, rests uncomfortably on its faith that economic growth will accelerate markedly in the second half of this year and further in 2014. We still think that the Bank is being overly optimistic in expecting GDP growth to accelerate later this year, never mind next year. Accordingly, any move in interest rates over the next year or so is more likely to be down rather than up.