PBO expects inflation to fall to 2% by end of year, deficit to grow amid weak economy

OTTAWA — The parliamentary budget officer is projecting inflation will return to the Bank of Canada's two per cent target by the end of the year and the federal deficit will grow amid weakening economic conditions.

The Bank of Canada is scheduled to make an interest rate announcement on Wednesday and is widely expected to hold its policy rate at five per cent. The PBO says the economy will likely grow by a modest 0.8 per cent this year, slightly lower than the Bank of Canada's projection of one per cent.The PBO anticipates the federal deficit to grow to $46.8 billion for the current fiscal year, provided no new measures are introduced and existing temporary measures expire as scheduled.The report warns that if the Bank of Canada keeps interest rates higher for longer than expected, the deficit could be even larger and the economy weaker.

"For our government, it is very, very important to invest in Canada and Canadians ... and to do so in a fiscally responsible way," Freeland told reporters ahead of the introduction of pharmacare legislation last week.The federal government pledged in the fall that the current fiscal year's deficit would not get any bigger than its $40-billion projection.

Source: Financial Digest (financialdigest.net)

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