Canada’s economic growth accelerated last quarter and momentum carried into the start of this year as the central bank’s forceful rate cuts boosted household spending.

Advance data suggest gross domestic product rose 0.3% in January, following a 0.2% expansion in December that ended the fourth quarter with a stronger-than-expected increase at a 2.6% annualized pace, Statistics Canada said Friday.

That’s the strongest growth since the second quarter, and a pickup from an upwardly revised 2.2% increase between July and September.

The Bank of Canada, which had been cutting interest rates aggressively last year to strengthen the economy, expected fourth-quarter GDP to grow 1.8%, while a median estimate from economists in a Bloomberg survey saw 1.7%.

The data may bolster a case for the central bank to pause its easing cycle at its next meeting March 12. But US President Donald Trump’s tariff threats, including 10% on Canadian energy and 25% on all other goods set to take effect Tuesday, loom over the bank’s decision-making.

Canadian government two-year bond yields fell less than a basis point on the day to 2.619% as of 9:10 a.m. in Ottawa, while the loonie dropped less than 0.1% to C$1.4426 per US dollar. Traders in overnight swaps put the odds of a March 12 rate cut at about 43%, compared with a coin flip a day earlier.

In the fourth quarter, solid growth was driven higher household spending as well as increased exports and business investment, especially residential construction. Household consumption rose 5.6% — the most since the second quarter of 2022.

Source: FINANCE.YAHOO