We now estimate that second-quarter GDP grew by an estimated 1.6% annualised, slightly below the Bank of Canada's revised 1.8% prediction. More importantly, economic growth below 2% is not enough to absorb the excess slack in the economy. Unfortunately, slower GDP growth over the next few quarters due to a faltering global economy and a housing slowdown point to persistent economic slack and subdued inflation. Accordingly, the Bank's stance that higher interest rates might soon be needed to achieve its medium-term inflation target seems futile.
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