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Down the road, “residential investment is anticipated to contribute less to overall growth,” the central bank said in announcing its July rate hike. “Macro-prudential and housing policy measures, as well as higher longer-term borrowing costs resulting from the projected gradual rise in global long-term yields, are all expected to weigh on housing expenditures.”

Meanwhile, spending by companies, long criticized for not putting enough of their post-recession cash to work, will likely heat up along with exports, “triggered by expanding economic activity in both the non-resource and resource sectors,” according to the bank. “The expansion in the resource sector indicates that the adjustment in the level of investment in this sector in 2015 and 2016 to the past oil price shock is largely complete.”

Craig Alexander, senior vice-president and chief economist at the Conference Board of Canada, said monetary policy, fiscal policy and the Canadian dollar “have all contributed to the very strong pace of economic growth we’re having this year.

“And as we move into next year, the appreciation of the Canadian dollar that we’ve been seeing, a smaller increase in fiscal stimulus and a modest rise in interest rates – all of those factors – will contribute to a moderation in Canadian economic growth to something that is still very healthy and close to its long-term trend,” Alexander said.

“From the point of view of the Bank of Canada, the ideal outcome is an economy that is growing at close to its long-term trend rate, which now is two per cent or slightly below, inflation at two per cent and slack in the economy — the output gap having closed — to achieve that outcome every single year,” he said.

“There are going to be years where there’s slack in the economy, and there’s going to be years where there’s no slack and the central bank needs to be acting to cool things down.”

And that’s what the central bank is now doing.

Special to Financial Post