All eyes are on the Bank of Canada this week as the date for its anticipated announcement regarding the key interest rate approaches, amidst a clear divergence in economic indicators, making the June decision one of the most sensitive and complex in years.

While the slowdown in economic growth and declining consumer confidence push towards lowering interest rates, recent inflation data indicates that price pressures remain, prompting analysts to describe the central bank’s dilemma as “a nearly impossible task.”

In a report published by CTV News, economist Derek Holt from Scotiabank stated that “the Bank of Canada faces a dual risk: lowering interest rates could undermine its credibility in fighting inflation, while keeping them steady could lead to a sharper economic slowdown.” This comes with increasing bets in the markets on the possibility of a 25 basis point rate cut, despite warnings against rushing.

Experts noted that the central bank may prefer to postpone a rate cut until July, to gather additional data, particularly regarding the labor market and household spending. The bank is also expected to closely monitor the policies of the U.S. Federal Reserve to avoid any significant gap in monetary policies between Canada and the United States, which could impact the Canadian dollar's exchange rate and capital flows.

It is worth noting that Canada’s annual inflation saw a slight increase of 2.7% in April, while the Bank of Canada still aims to bring inflation back to the 2% level.

If the bank decides to cut rates, it will be the first central bank from the Group of Seven (G7) industrialized nations to take such a step, at a moment in the economy described as very delicate and fraught with volatility.