While there are many factors at play, including oil prices, most of the increase appears to be due to shifts in expectations about monetary policy in both the United States and Canada. The higher assumed level of the dollar in our projection contributes to a lower profile for non-resource exports, as does lower demand from the United States and elsewhere.
As the Bank’s Governing Council began its deliberations for this month’s interest rate announcement, we saw that these three developments would have meant a lower projected growth profile for the Canadian economy than we had in January. This may sound counterintuitive, given the range of monthly economic indicators that started the year strongly.