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UBS Updates Its Canada Macroeconomic Forecasts Amid High Oil Prices

-- UBS said it is taking on board the latest moves in oil prices into its Canadian inflation projections with the latest path implied by oil futures, with Brent reaching US$118 per barrel in the May contract before settling at around US$78/barrel by the end of the year and US$73/barrel by end 2027.

With this, the bank now expects annual headline inflation of 2.9% this year and 2.4% in 2027. UBS estimates a strong 1.3% non-seasonally adjusted rise in headline inflation in March, carrying the year-over-year rate one percentage point higher to 2.8% in March.

UBS predicts headline inflation will peak at 3.4% year over year in April before moderating from there.

In the bank's growth projections, it expects a stronger pace of exports, but marked down business fixed investment and consumption.

Overall, the bank's annual projections are little changed, with annual growth of 1.6% this year and 1.7% in 2027.

The latest monthly gross domestic product data suggests an "okay" start to the year, with monthly GDP up 0.1% in January, a little better than the flat print in the flash estimate, and the flash estimate for February was a 0.2% month-over-month rise.

After a strong broad-based decline in employment in February, UBS forecasts a "mild" 16,000 rise in employment in March, with the unemployment rate holding steady at 6.7% in the employment data to be published on Friday.

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