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The parliamentary budget officer (PBO) expects inflation to return to two per cent by the end of 2024.
In a report released today, the watchdog also said it expects the Bank of Canada to start bringing down its key interest rate in April.
The Bank is scheduled to make its next interest rate announcement on Wednesday, March 6, with many economists predicting it will keep the rate at five per cent.
After Wednesday, the next rate announcement is set for April 10.
The PBO said it expects growth in Canada to remain “sluggish” throughout the year, projecting the economy to expand by 0.8 per cent over 2024.
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“Restrictive monetary policy is expected to restrain growth in consumer spending in the first half of the year and to dampen residential investment over the course of this year,” its report explains.
It said inflation will come down to the Bank’s two per cent target due to “excess supply in the economy” and weakening commodity prices.
The inflation rate was 2.9 per cent in January, according to Statistics Canada.
The PBO’s report also projects that the budgetary deficit will rise to $46.8 billion in 2023-24, or 1.6 per cent of GDP. The federal government predicted in the fall that it would be $40 billion.
It was $35.3 billion (1.3 per cent of GDP) in 2022-23.
“Assuming no new measures are introduced, and existing temporary measures sunset as scheduled, the deficit is projected to resume its downward trajectory, falling to $16.9 billion (0.5 per cent of GDP) in 2028-29,” the report adds
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