Capital Macro: GDP data provides support for the Bank of Canada to address inflation threats.

Bradley Sanders from Capital Economics said that the strong GDP data in January may give the Bank of Canada more room to maneuver in response to the general price increases caused by the rising energy prices. The economist said that GDP grew by 0.1% from the previous month in January, and is estimated to grow by 0.2% in February, which should put the Canadian economy on track for an annualized growth rate of close to 1.8% in the first quarter. This is in line with the current forecasts of the Bank of Canada. Saunders said, "This does not necessarily mean that interest rates will definitely rise this year." He also said, "But any signs of expanding price pressures are now more likely to lead to policy tightening." Overnight index swap traders expect the Bank of Canada to raise interest rates up to three times this year, each time by 25 basis points.