Canadian consumers and businesses pin hopes on lower interest rates: BoC

Canadian consumers and businesses are slightly more optimistic about the future, Bank of Canada surveys show, though both groups are dealing with high interest rates and inflation.

Canadian consumers and businesses are less pessimistic about the future, suggest findings from the Bank of Canada released on Monday.

Consumers continue to feel the negative impacts of high inflation and interest rates and nearly two-thirds are cutting or postponing spending, according to the BoC’s quarterly survey on consumer expectations.

But it also showed Canadians are expecting lower interest rates in the coming 12 months and “are less pessimistic about the future of the economy and their financial situation.”

The Bank’s matching first quarter survey on businesses showed signs of returning optimism as well. Business owners believe Canada’s population growth will lead to more sales and they are also expecting interest rates to decline in the next year.

The Bank held the interest rate at 5.0 per cent for the fifth consecutive time in March, with Governor Tiff Macklem saying it was “too early” to cut it. Canada’s interest rate slowed to 2.8 per cent in February.

Economists have predicted that Canadians could begin to slowly see rate cuts starting with the June 5 BoC interest rate announcement or later this year.

Consumers, who base their perceptions of inflation on their own experience buying items like food and gas, believe inflation has slowed, the report stated.

Canadians’ current sentiment remains weak because inflation and interest rates are high, but “…fewer (consumers) think they will need to further cut or postpone spending,” the report said.