But the bank is concerned that the weak labor market could prevent that from happening.

“If this continues, it will be extremely difficult to restore consumption to normal levels, and pressures on inflation and growth will increase,” the bank said.

While consumer price inflation continues to weaken, the bank is putting more emphasis on the risks associated with its 2% inflation target and has signaled that it will continue to cut rates until that target is met.

The next rate cut announcement is scheduled for Sept. 4.

At the same time, “major Canadian banks feel the need to cut rates before the end of July,” said Roy Mendes, managing director of Desjardins. “While the central bank continues to believe that consumer demand will recover, management is concerned about the risks associated with the upcoming mortgage rollover and the weak labor market.”

Mariana V