08:10 AM EST, 12/17/2024 (MT Newswires) -- Following a day of drama in Canada, Monday's fiscal update brought fairly modest additions to spending alongside tax incentives focussed on supporting business investment in a time of increasing economic uncertainty, said CIBC.

The C$2.1 billion addition from new measures to the current year deficit -- rising to C$3.7 billion in fiscal 2025/26) -- represents only around 0.1% of gross domestic product a year, and so at this stage isn't the sort of large fiscal splash that would force CIBC to change its forecasts for Bank of Canada interest rate cuts, particularly given the downside risks currently facing the economy.

In addition, for now, two of the three previously set fiscal anchors, reducing the deficit to 1% of GDP by 2026/27 and lowering debt as a proportion of GDP, remain intact.

The phrases "for now" and "at this stage", though, are key, as the resignation of Chrystia Freeland as finance minister just hours before the release of Monday's update brings a new source of fiscal uncertainty heading towards the 2025 budget, added the bank.