Despite all the good news emanating from Europe, The Bank of Canada splashed some cold water on market forecasters this week with a new set of much more pessimistic forecasts on the Canadian economy.

The BoC now expects Canada’s economy to grow by just 2.1% this
year and 1.9% next year, compared to their previous forecast of 2.8% and 2.6% respectively. Growth is then expected to rise in 2013 to 2.9%.

Central to the BoC’s new outlook is further headwinds blowing from the global economy and in particular the European situation. Considering the markets seem to believe that major ground on the latter issue was made yesterday, it is possible that the new, more pessimistic forecasts will not materialize.*

*ATB Financial, October 28, 2011
Todd Hirsch, Dan Sumner, Will Van't Veld