May GDP surprise calls Canada’s rate outlook into question again
Construction, manufacturing, and the finance and insurance sector all expanded for a second consecutive month, while April’s GDP figures were revised upward by a tenth of a percentage point to 0.6%.
Andrew Grantham, an economist at the Canadian Imperial Bank of Commerce (CIBC), urged restraint.
“Growth was flattered by a reversal of some one-off factors — oil maintenance, weather disruptions — that negatively impacted the first quarter, as well as potentially some positive contributions related to the FIFA World Cup,” he said.
September rate call complicated by tariffs and inflation
The overnight rate has been unchanged at 2.25% for six consecutive decisions, a freeze that has extended through every rate announcement since December 2025, leaving variable mortgage and home equity line of credit (HELOC) rates anchored at prime minus their discount, with the prime rate holding at 4.45%.
The stronger-than-expected May result does little to simplify the path to September. Canada’s annual inflation rate climbed to 3.2% in May, its highest reading in more than two and a half years, driven almost entirely by gasoline.
