The Bank of Canada will announce its latest interest rate decision on Wednesday amid speculation that the central bank might start to cut rates.
On balance, financial markets expect the bank to cut its key lending rate by a quarter of a percentage point, but the view is by no means universal, with some expecting it to wait.
"Evidence has continued to build that the current high level of interest rates is no longer needed," RBC said in a client note on Friday.
"Still, while the case for interest rate cuts in Canada is relatively clear — the BoC will likely maintain a cautious tone about the pace of additional cuts after next week."
If the Bank of Canada opts to lower rates on Wednesday, it would mark the first rate cut since March 2020, when the COVID-19 pandemic prompted the central bank to slash its key rate to near-zero.
Bank of Canada governor Tiff Macklem has said a rate cut is within the realm of possibilities, but that the decision will be guided by the economic data. He has said the central bank is seeing what it needs to see, but wants to see it for longer to be confident that progress toward price stability will be sustained.
Economists have been particularly encouraged by Canada's marked slowdown in price growth.
The annual inflation rate for April came in at 2.7 per cent compared with 2.9 per cent in March.
Core measures of inflation, which strip out volatile prices, have also steadily eased in recent months.
The interest rate decision follows a report by Statistics Canada last week that showed economic growth in the first quarter fell short of the Bank of Canada's expectations. The report also revised its reading for growth in the fourth quarter of 2023 lower.
However, the jobs report for April showed employment rose by 90,000 for the month and marked the largest employment increase in more than a year.
If the Bank of Canada does not cut interest rates on Wednesday, it's widely expected to do so next month instead.
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2024-06-03 14:17:00Z
CBMif2h0dHBzOi8vd3d3LmNhc3RhbmV0Lm5ldC9uZXdzL0NhbmFkYS80OTA1MTcvQmFuay1vZi1DYW5hZGEtaW50ZXJlc3QtcmF0ZS1kZWNpc2lvbi1jb21pbmctb24tV2VkbmVzZGF5LWFtaWQtcmF0ZS1jdXQtc3BlY3VsYXRpb27SAQA
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