The Parliamentary Budget Officer Yves Giroux expects inflation, by the end of the year, to return to the 2% target set by the central bank, while the federal deficit increases amid the economic slowdown.

These expectations come as the federal government prepares to present its budget next month, and Canadians eagerly await the Bank of Canada to start cutting interest rates.

Giroux expects in his report that the first interest rate cut will occur in April, slightly earlier than what financial markets anticipated.

The Bank of Canada is scheduled to announce interest rates tomorrow, Wednesday, and it is expected by many to maintain the key interest rate at 5%.

It is noted that high interest rates have affected the Canadian economy as consumers reduced spending and businesses experienced a slowdown in sales.

Last week, the Canadian Statistics Agency reported that the economy grew by 1% annually in the last quarter of the year. This growth was largely driven by increased exports, supported by strong spending trends in the United States.

The Federal Parliamentary Budget Officer confirms that the economy will grow modestly by 0.8% this year, slightly less than the central bank's forecast of 1%.

Weak economic growth is also expected to affect government coffers.

The Federal Parliamentary Officer indicates the possibility of the federal deficit rising to $46.8 billion for the current financial year. This will exceed the government's expectations last fall which spoke of $40 billion.

Giroux warns that if the Bank of Canada keeps interest rates high for longer than expected, the deficit may be larger and the economy weaker.

In a related context, Canada's federal finance minister Chrystia Freeland announced on Monday that she will present the new budget on April 16.

The budget is likely to be a difficult exercise for the Liberal Party this year.