09:21 AM EDT, 08/01/2024 (MT Newswires) -- Bank of Montreal (BMO) advised to keep an eye on Canada's federal budget deficit.

Almost under the cover of darkness, Ottawa released the deficit figures from the first two months of the fiscal year last Friday, and the news was "not great," noted the bank.

In April and May, the deficit rose to C$3.9 billion from a surplus of C$1.5 billion the prior year. That extends an unfortunate pattern of deterioration over the past 18 months or so, stated BMO.

Looking at the combined reported deficits in the latest 12 months, the rolling shortfall is now C$56 billion, versus C$45 billion a year ago.

This is not a precise reading, as Ottawa makes final adjustments to arrive at the official deficit tally, pointed out the bank. However, C$56 billion is a long way from the targeted deficit of C$40 billion or less (for both FY23/24 and FY24/25).

With interest costs now running at a record C$50 billion, and still

rising -- they hit a new high in May at C$4.8 billion -- and other

spending showing little sign of slowing, it's tough to see what's going to cut the deficit, added BMO.