04:30 PM EDT, 03/18/2024 (MT Newswires) -- In Canada, National Bank said, it is becoming "increasingly clear" that the rate hikes announced since the start of the recent tightening cycle are taking their toll on the economy, with GDP per capita falling for six quarters, and private domestic demand for two. As for the labor market, National noted, the private sector has generated few jobs since June 2023. Moreover, it added, business survey data do not point to any improvement in this area over the next few months, with a significant proportion of companies reporting falling sales and a return to normal in the proportion of companies experiencing labour shortages.

Despite this, National noted, "progress on inflation is stalling", mainly due to the shelter component, stimulated by outsized population growth and rising interest rates.

As the Bank of Canada's latest communications have focused on inflation resilience rather than signs of weak growth, National said there is a risk that it will inflict too much damage on the economy by maintaining an overly restrictive monetary policy. "All in all, we anticipate a difficult 2024 for economic growth, which should be limited to an increase of 0.3%, while a slight acceleration to 1.2% is expected the following year," National added.