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Recent economic data from Canada indicates a slower growth rate in February and an anticipated contraction in March, coupled with a deceleration in inflation. This suggests that the Canadian central bank’s plans to keep interest rates on pause are well-founded. As the impact of the 2022 interest rate hikes continues to take effect, inflation is expected to cool, potentially leading to eventual rate decreases. These developments can be seen as positive news for the┬áCanadian economy and its future stability.

Canadian Economic Growth Slows Down

Data released on Friday revealed that the Canadian economy grew less than expected in February compared to the previous month. Moreover, it is projected to shrink in March. While this may initially appear concerning, it is important to consider the slowing growth could be a sign that the central bank’s earlier interest rate hikes are taking effect and will eventually help stabilize the economy.

Inflation Decelerates to the Lowest Level Since August 2021

Another key indicator of economic stability is the inflation rate. In March, Canada’s inflation rate fell to 4.3 per cent, down from 5.2 per cent in the previous month. This marks the lowest level of inflation since August 2021. This deceleration in inflation is another positive sign that the central bank’s previous actions are having their intended effect on the economy.

Interest Rates on Pause: A Positive Sign for the Economy

With both economic growth slowing and inflation decelerating, it is increasingly likely that the central bank will maintain its plan to keep interest rates on pause. This decision should continue to support the economy as it adjusts to the impact of the 2022 interest rate hikes. As these hikes work their way into the economy, which generally takes 12 or more months, inflation is expected to cool further. This will eventually lead to a decrease in interest rates, which would be a positive development for the Canadian economy.

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