May Growth Boosts Expectations for Bank of Canada Rate Hike

The Canadian economy rebounded in May with growth stronger than expected, according to Statistics Canada data. This news has reinforced expectations that the Bank of Canada will hold its key interest rate at 2.25% for another nine months.

However, a new wave of US tariffs set to take effect on August 19 and ongoing trade uncertainty may temper growth in the second half of the year, complicating the Bank of Canada's path forward.

Most traders predict a quarter-point rate hike by the end of this year, according to Bloomberg data. The Canadian five-year bond yield, which serves as a benchmark for fixed-rate mortgages, settled at 3.23% on Thursday.