Canada's economy is stagnating and the central bank is likely to remain on hold

　　The Canadian (CAN) economy stalled last month and recorded only modest growth this month, requiring the Bank of Canada (BoC) to remain on hold.

　　Gross domestic product data released by Statistics Canada (CanStat) showed zero growth in July, missing the 0.1 per cent median forecast of economists surveyed by Bloomberg but better than the 0.2 per cent contraction the previous month. Preliminary data showed that GDP edged up 0.1 percent in August.

　　Canadian two-year bond yields fell 4 basis points to 4.876 per cent after the data.

　　Royce Mendez, managing director and head of macro strategy at Desjardins Securities, said: "While inflation remains above the Bank of Canada's target, the slowing economy should give the central bank confidence that their work is slowly working." Price pressures should dissipate further as the economy continues to cool amid the lagged impact of higher interest rates."

　　Robert Kavich, an economist at Bank of Montreal (BMO), said: "While there are some disruptions to the data, the underlying story is that Canada is struggling to grow. Given the explosive population growth, real GDP looks even weaker. The Bank of Canada remains concerned about stubborn core inflation and solid wage growth, but stagnant economic growth calls for restraint."