TD Securities' analysts are not expecting further rate increases from the Bank of Canada (BoC), meaning the overnight rate will top out at 1.75% this cycle.

• Q4 GDP was the nail in the coffin, as the muted growth figures and expectations for sub-trend growth in Q1 imply an output gap that will not close before the end of 2020; our current tracking of Q1 growth sits at 0.6%.
• Furthermore, recent developments suggest that homeowners are still struggling to adapt to higher rates, with existing home sales holding near a 7-year low in March while household leverage sits at a record high. Core inflation firmed to 1.97% in March but most of the move was driven by base-effects and we see little scope for further gains given the muted growth backdrop.
• The labour market remains the one bright spot in the domestic economy, perplexingly, with the April LFS reporting monthly job creation of 106.5k which pushed the six-month average to 51k. Furthermore, wages have finally started to pick up off the lows with average hourly earning for permanent workers running at 2.6% y/y. While this should provide the BoC some comfort to remain on the sidelines as the market prices in cuts, it is not enough to keep the Bank on a tightening path.