The Bank of Canada reported improved business and consumer sentiment in the first quarter of the year, despite higher interest rates still affecting the economy. 

The central bank released its business outlook and consumer expectations surveys, showing increased optimism as people expect interest rate cuts are nearing. Although firms reported weak demand, indicators of business conditions, sales outlook, and employment intentions improved after several quarters of decline. 

The Bank of Canada said that expectations for improved sales are supported by population growth, efforts to enter new markets or develop new products, and expectations that interest rates will decline over the next 12 months.

Nearly two-thirds of Canadian consumers are cutting or postponing spending due to high inflation and interest rates. However, consumers are becoming less pessimistic about the future of the economy and their financial situation as they expect interest rates to fall. Workers also continue to be optimistic about the job market and expect strong wage growth, despite signs of the labour market loosening.

The Bank of Canada responded with rapid interest rate hikes, raising its key interest rate target to 5%, the highest it’s been since 2001. Forecasters expect the central bank to begin lower its policy rate around the middle of the year as inflation continues to fall and economic growth remains weak.

Source: The Star
Source: Financial Post
Source: Globe and Mail