Lower Rates Ahead

Canada's economy unexpectedly shrank between January and March for the first quarterly drop in almost five years, giving the Bank of Canada more reason to cut borrowing costs again next month.

Gross domestic product contracted at a 0.3 percent annualized rate in the first quarter to C$1.33 trillion ($1.34 trillion), Statistics Canada said today in Ottawa.

Bank of Canada cut rates by half a point last month for the second straight meeting and said more action was likely needed because an export slump would bring the slowest growth since the last recession in 1992.

Today's report signals production hasn't yet turned around. The Canadian dollar fell as investors increased bets the central bank will ease a fifth consecutive time on June 10.