Bank of Canada Likely to Maintain Interest Rates This Week Amid Economic Uncertainty

The Bank of Canada is anticipated to advocate patience during its interest rate declaration this week, with economists predicting that weakening economic conditions will lead to rate cuts in the upcoming months.

On Mar. 6, the central bank is widely expected to maintain its key interest rate at five percent, with many analysts forecasting the first rate reduction to occur around June.

The Bank of Canada will have the chance to assess the latest gross domestic product data and its impact on the trajectory of interest rates.

Economists suggest that the deceleration in the Canadian economy aligns with the central bank’s expectations and desires.

Royce Mendes, managing director and head of macro strategy at Desjardins, remarked, “At the margin, things are looking a little bit weaker than what the Bank of Canada might have envisaged.”

“Domestic spending in the fourth quarter was lower compared to the third quarter, which is particularly concerning considering the significant population growth during that period,” added Mendes.

The Canadian economy expanded at an annualized rate of one percent in the fourth quarter, surpassing expectations and the Bank of Canada’s recent projections.

However, the headline figure appears to mask the underlying weakness of the Canadian economy.

Growth in the last quarter was driven by global factors such as robust U.S. spending trends that boosted Canadian exports.