(UPDATE: April 10 @ 8:15 am): Bank of Canada governor Tiff Macklem says the central bank could begin lowering its key interest rate at its next decision in June after deciding to hold it steady for now.
"Yes, it’s within the realm of possibilities," Macklem said in response to a question about the possibility of a rate cut in June.
The Bank of Canada kept its key interest rate at five per cent Wednesday and said that it’s begun to see the economic conditions necessary to lower interest rates.
“I realize that what most Canadians want to know is when we will lower our policy interest rate. What do we need to see to be convinced it’s time to cut?” Macklem said.
“The short answer is, we are seeing what we need to see but we need to see it for longer to be confident that progress toward price stability will be sustained.”
Along with the rate announcement the Bank of Canada released its quarterly monetary policy report, which suggests the likelihood of a “soft landing” — whereby inflation slows without a significant economic downturn — has increased.
The central bank has slightly revised down its forecast for inflation this year and continues to expect it to return to the two per cent target by the end of 2025.
Economic growth is expected to come in stronger than previously anticipated this year. The central bank is forecasting the economy to grow by 1.5 per cent this year and about two per cent in 2025 and 2026.
Global growth has also been revised up to 2.8 per cent for this year.
(UPDATE: April 10 @ 6:55 am): The Bank of Canada has held its overnight interest rate target at five per cent.
The move was widely predicted by economists and financial analysts, many of whom expect the Bank to begin lowering its rate on June 5.
In a notice explaining its decision, the Bank said economic growth "stalled" last year and moved into "excess supply."
"A broad range of indicators suggest that labour market conditions continue to ease," it added.
"Employment has been growing more slowly than the working-age population and the unemployment rate has risen gradually, reaching 6.1 per cent in March. There are some recent signs that wage pressures are moderating."
The central bank believes economic growth will "pick up" in Canada in 2024, however.
"This largely reflects both strong population growth and a recovery in spending by households," its notice explained.
"Residential investment is strengthening, responding to continued robust demand for housing. The contribution to growth from spending by governments has also increased. Business investment is projected to recover gradually after considerable weakness in the second half of last year. The Bank expects exports to continue to grow solidly through 2024."
The Bank said it predicts a GDP growth rate of 1.5 per cent this year, 2.2 per cent in 2025 and 1.9 per cent in 2026.
It said the strengthening economy will "gradually absorb excess supply" in 2025 and 2026.
On inflation, the Bank predicts it will achieve its target of two per cent in 2025.
Inflation was 2.8 per cent in February. The Bank forecasts it will decline to below 2.5 per cent later this year.
"While inflation is still too high and risks remain, CPI and core inflation have eased further in recent months," the Bank said.
"The Council will be looking for evidence that this downward momentum is sustained. Governing Council is particularly watching the evolution of core inflation, and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.
"The Bank remains resolute in its commitment to restoring price stability for Canadians."
(Original story: April 10 @ 5:15 am): The Bank of Canada is set to announce its interest rate decision this morning.
It’s widely expected to maintain its key interest rate at five per cent, but economists will be watching for any hints about the timing of upcoming rate cuts.
Forecasters expect the central bank to begin lowering its key rate in June as the economy continues to slow and inflation trends lower.
High interest rates have slowed demand in the economy as consumers pull back on spending and businesses hold off on investment plans, helping lower inflation.
Canada’s inflation rate was 2.8 per cent in February.
The Bank of Canada will also release its monetary policy report, which will offer its latest projections for inflation and economic growth.
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