Economists say the momentum is putting the Bank of Canada in a tough spot: the central bank has argued that a slowdown is necessary to bring inflation back to the two per cent target, but that slowdown hasn’t yet come to fruition.
Now, all eyes will be on how the central bank addresses the recent data and underlying strength in the economy.
Canada’s strong economic results are at odds with the expectation last year that interest rates would push the economy into a recession. Instead, economists are now speculating the Bank of Canada will raise interest rates in July. “It’s going to be a very close call, ultimately, I think they’ll want to maybe accumulate a little bit more data,” Jean said.
Ultimately, the governing council opted to remain on pause, but Macklem said that the central bank is still leaning toward raising interest rates further, rather than cutting rates this year. In April, Canada’s inflation rate ticked up slightly to 4.4 per cent after steadily declining since last summer. Inflation is still expected to continue trending downward, but Jean said there’s cause for concern.Article content
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