The Bank of Canada is widely expected to cut its key overnight rate on Wednesday for a second time in as many months, after recent data showed a further easing of consumer price inflation, restrained spending and a lackluster economic outlook.

The BoC trimmed its policy interest rate by 25 basis points to 4.75% last month after keeping it at its highest in more than two decades for nearly a year. In making its first cut in four years, it became the first Group of Seven central bank to do so since the pandemic.

A Reuters poll released on Friday showed nearly three-quarters of economists surveyed from July 16 to July 19 expected a cut in policy rate to 4.50% this week.

"A rate cut is likely to be delivered," said Taylor Schleich, rates strategist at the National Bank of Canada, adding that he also expected the central bank to reiterate its message that future cuts will be based on incoming data.

At the time of the last cut, BoC Governor Tiff Macklem said any future rate reductions would be data-dependent.

Financial markets are seeing almost a 91% chance of a rate cut this week and a total of 75 basis points drop in borrowing costs this year.

The BoC will announce its monetary policy decision on July 24 at 9:45 a.m. ET (1345 GMT). It will also release the quarterly Monetary Policy Report, which will include fresh forecasts on 2024 economic growth and inflation. Economists expect them to be lower than previous forecasts.

Inflation slowed more than expected to 2.7% in June - with BoC's closely tracked core inflation measures also easing marginally - making a strong case for another trim in rates. Even so, inflation is still near the top of the bank's target range of 1%-3%.

Economists have been worried that consumer prices are not coming down fast enough to allow the bank to be aggressive enough to spur a less-than-robust economy.

"They're probably going to acknowledge lingering inflation risks," Schleich said.

Canada's economic growth has been positive this year but barely encouraging. Rising unemployment has also highlighted economic constraints and underlying fears of recession.

The bulk of the growth has been attributed to an immigration-led rise in population, rather than any inherent strength of the economy. In its latest Monetary Policy Report in April, the bank estimated growth in 2024 would come in at 1.5% and 2.2% in 2025.

"Things are very weak, particularly on a per capita basis," said Randall Bartlett, senior director of Canadian economics with Desjardins Group.

In a survey last week, the BoC found that the willingness of businesses to invest is below average due to a weak demand outlook.

In the rate-sensitive housing sector, demand has not picked up. Retail sales data released last week showed consumer spending shrank in May and will likely show a decline in June.

Despite the persistent economic weakness, the BoC would likely refrain from making rate cuts deeper than 25 basis points.

"The Bank of Canada will be very gradual in taking its foot off the brake," Bartlett said.

(Reporting by Promit Mukherjee; Editing by Sandra Maler)