The Bank of Canada is widely expected to hold its trendsetting overnight interest rate steady at 2.75% when it concludes it latest policy meeting later today (June 4).
Signs that inflation is beginning to creep upwards is likely to keep the central bank on the sidelines despite the fact that Canada’s economy and labour market are exhibiting weakness, say analysts.
Twenty of 26 economists surveyed by the Reuters news agency said they expect Canada’s central bank to stand pat on interest rates at the June meeting.
Many of the economists who were polled mentioned April’s higher-than-expected core inflation rate as a fact that is likely to give the Bank of Canada pause.
However, market commentators are saying that the central bank’s job is getting more complicated as tariff uncertainty with the U.S. remains high and as the economy cools.
In recent weeks, there have been signs of deteriorating employment, with manufacturing jobs down 30,600 in April, a stagnant housing market, and signs that the economy has slowed.
In such an environment, the prudent course of action is for the Bank of Canada to hold interest rates at current levels as it gathers more economic data and seeks greater clarity, say analysts.
Additionally, Canada’s federal government in Ottawa could unveil economic stimulus measures in the coming months that would give the economy a lift.
Prior to its April decision, the Bank of Canada had issued seven consecutive interest rate cuts, beginning in June 2024, and lowering its benchmark policy rate to its current level of 2.75%.
