(Ottawa) The Parliamentary Budget Officer (PBO) predicts that inflation will return to the Bank of Canada’s 2% target by the end of the year and that the federal deficit will increase amid an economic slowdown .
The budget watchdog released the latest economic and fiscal outlook on Tuesday.
The report predicts that the central bank could start cutting interest rates in April.
High interest rates have weighed on the Canadian economy as consumers cut spending and businesses see sales slow.
The PBO says the economy is expected to grow a modest 0.8% this year, just shy of the Bank of Canada’s forecast of 1%.
Weak economic growth is also expected to weigh on government coffers.
The PBO also projects the federal deficit to increase to $46.8 billion for the current fiscal year, which would exceed the government’s fall forecast of $40 billion.
The report warns that if the Bank of Canada keeps interest rates high for longer than expected, the deficit could be even higher and the economy weaker.
Finance Minister Chrystia Freeland announced Monday that she will present the federal budget, which will take stock of the state of federal finances, on April 16.