This is the only time you will see the word “recession” in this column—even though its subject is the release Monday of a government report that showed Canada’s gross domestic product contracted for two consecutive quarters through June. The term is loaded and its meaning is disputed. The word serves no purpose in a discussion about what Statistics Canada’s second-quarter report tells us about the real state of the country’s economy, and how the central bank may respond.
Let’s start with the latter. National Bank’s economists think the Bank of Canada will cut its benchmark interest rate again next week. They probably aren’t alone. Oil prices are much lower than Governor Stephen Poloz thought they would be when policy makers releasedtheir latest forecasts in July. Given the collapse of commodity markets was the trigger for the shock interest-rate cut in January, it is reasonable to speculate that continued weakness could prompt the central bank to lower borrowing costs a third time in 2015.
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