MNI BRIEF: Budget Office Sees Canada Breaking Fiscal Anchor

Canada's parliamentary budget office sees the government again breaking fiscal "anchors" with deficits boosting the shortfall relative to the size of the economy, the kind of path the central bank has said could make fighting inflation harder.

The deficit in the fiscal year starting April 1 was estimated at CAD46.8 billion or 1.6% of GDP, up from 1.3% of GDP in prior year, according to the report Tuesday.

Finance Minister Chrystia Freeland Monday said her budget will come April 16 and be fiscally responsible while sprinkling in measures to help with a housing squeeze, and her fall update pledged deficits below 1% of GDP and shrinking deficits. The government recently made cuts to departmental spending that may not be covered in the budget office's report.

The report was based on a view of a weak economy that slows inflation to 2% by year-end and leads the BOC to cut rates at each meeting starting April. Governor Tiff Macklem has said government spending that runs faster than the economy's potential could make it harder to return inflation to target. (See: MNI: BOC Still Needs Patience As Inflation Slows- Ex Staffer)