The International Monetary Fund (IMF) says the Canadian economy appears to have achieved a “soft landing” when it comes to taming inflation.
A so called “soft landing” refers to a situation where elevated interest rates lower inflation without causing an economy to fall into recession.
Central banks around the world have been trying to orchestrate a soft landing for their respective economies ever since inflation spiked coming out of the Covid-19 pandemic.
The latest inflation reading in Canada for June showed that consumer prices rose an annualized 2.7%, which is within the 1% to 3% range targeted by the Bank of Canada.
At the same time, the Canadian economy has managed to avoid a recession, defined as two consecutive quarters of contraction. Although the economy has slowed in recent months.
Consequently, the Bank of Canada lowered interests in June of this year by 25-basis points, taking its trendsetting overnight rate down to 4.75% and becoming the first central bank among the Group of Seven (G7) leading industrialized nations to cut rates.
Markets are betting 92% in favour of a second rate cut by the Bank of Canada on July 24.
In its latest outlook for the global economy, the IMF singles out Canada for managing to achieve a soft landing with inflation, saying: “Inflation has come down almost to target, while a recession has been avoided…”
The IMF revised its economic growth forecast for Canada, raising its outlook this year by 0.1 percentage points to 1.3%.
The financial agency of the United Nations (U.N.) forecasts economic growth of 2.4% in Canada during 2025.
Beyond Canada, the IMF said that the global economy is likely to register modest growth over the next two years amid cooling activity in the U.S. and stronger consumption in China.
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