National Bank of Canada economist Taylor Schleich believes that despite recent strong employment data and rising inflation, the Bank of Canada (BoC) still has compelling reasons to cut rates in March.

The probability of a rate cut has fallen sharply in recent weeks, from nearly 100% to less than 33%, following the postponement of U.S. tariffs and strong January employment figures. However, Schleich notes that the BoC may ignore these factors, as it did not see any evidence of a sustained rise in inflation in its January Monetary Survey.

Key arguments for a rate cut:

• The postponed U.S. tariffs have already made businesses cautious, slowing investment.
• A weak labor market, with hiring intentions below historical norms and job openings at a seven-year low.
• A slowdown in housing activity, driven by concerns about a trade war with the U.S.

Schleich believes that the Canadian economy remains vulnerable and the BoC will likely take a more accommodative stance. However, if there are signs of rapid growth or a sharp jump in inflation in the coming weeks, the Bank may change its stance before its rate announcement on March 12.