OTTAWA — The Bank of Canada is set to make its latest rate announcement this morning and update its outlook for the economy.
Several economists from Canada's big banks expect the central bank to cut its key rate. Nonetheless a rate cut from its current 0.75 per cent is far from a sure bet.
The Bank of Canada unexpectedly cut the rate in January by a quarter of a percentage point to cushion the impact of the drop in oil prices on the economy.
Since then, the Canadian economy has contracted in each of the first four months of the year, prompting speculation the country may have slipped into a recession in the first half of the year.
The Bank of Canada is widely expected to cut its outlook for economic growth this year from its April forecast of 1.9 per cent.
The International Monetary Fund slashed its forecast for Canada last week to just 1.5 per cent from its earlier prediction of 2.2 per cent.
The rate announcement and monetary policy report come on the heels of some disappointing economic news, including a large trade deficit and an outright contraction of the economy in April.
In its business outlook survey last week, the Bank of Canada observed a divide in business confidence across the country as low oil prices hurt some regions more than others.
The summer edition of the report suggested businesses on the Prairies will be hurt as the oil price shock spreads across other sectors. However, the central bank noted the situation isn't the same across the country with regions that are less exposed to the energy sector expected to show strength.
The Canadian jobs market has also provided some optimism.
Last week, Statistics Canada reported the economy lost 6,400 jobs, due to big losses in part-time employment. However, the agency said most of those losses were offset by gains in full-time jobs.
For the second quarter as a whole, the economy added 33,000 jobs including 143,000 full-time jobs, while part-time work fell by 110,000.
The Canadian Press