Higher revenues on the back of elevated oil prices and stronger economic growth were behind downward revisions to the budget deficit projections in the Spring Economic Update (SEU). While the economic backdrop has improved, we still think heightened uncertainty around CUSMA and Prime Minister Carney’s penchant for spending will keep the deficit above 2% of GDP over the next couple of years. Accordingly, the Bank of Canada will still feel obliged to hike rates this year should oil prices remain higher for longer.
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