Canada’s economic growth is weighed down by its sensitivity to interest rates when compared to the U.S., allowing the Bank of Canada to pause rate hikes while its counterpart continues to drive rates higher, according to one economist.
James Orlando, senior economist at TD Economics, said that Canada has started to see a “fairly significant slowing in economic growth.”
Higher interest rates have begun to weigh on growth, he said, which can be seen with the “severe pullback” in Canada’s real estate market and lower consumer spending during the third quarter. increased its key policy rate by 25 basis points to 4.5 per cent, and signalled a conditional pause in its rate hike cycle. also increased interest rates by 25 basis points on Wednesday, bringing its benchmark rate to 4.75 per cent.
“We do have to watch south of the border to see how the Fed acts and how they handle things right now because we do know that those financial conditions that would be potentially experienced in the U.S. would transfer into Canada,” he said.
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