Bank unlikely to shift on neutral interest rate outlook

We expect the Bank of Canada to keep interest rates at 0.50% next week and maintain a neutral outlook for future policy changes. Despite the strong start to the year, policymakers indicated recently that they believe the economy isn’t out of the woods yet, given the ongoing downturn in the energy sector. Indeed, we think the economy will struggle over the rest of the year due to falling investment and a slower pace of hiring. This in turn should prompt the Bank to cut rates later in the year.