The U.S. investment bank Goldman Sachs (NYSE: GS ) has predicted that the Bank of Canada will keep interest rates steady in September before implementing a final rate increase in October 2023. This forecast comes after Canada's economy displayed no growth in the second quarter of this year, leading Goldman Sachs to suggest that the country might already be experiencing a "technical recession" if the economic output contracts again in the current third quarter.
The Bank of Canada is set to announce its latest decision on interest rates on Wednesday. Futures markets are also predicting that the central bank will maintain rates at their current levels. The Bank's trendsetting overnight interest rate currently stands at 5%, marking its highest level in 22 years.
Goldman Sachs' outlook on Canada's interest rates follows recent economic data which the bank interprets as an "encouraging signal that the latest hikes are working." A recession is typically defined as two consecutive quarters of negative economic growth. If Canada's economic output shrinks for a second consecutive quarter, it would meet this definition.
The Bank of Canada has been using interest rate hikes as a tool to manage economic growth and inflation. The anticipated pause in September could be seen as an opportunity for the central bank to assess the impact of its recent rate increases before deciding on further action in October.
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