Bank of Canada Governor Tiff Macklem holds a press conference at the Bank of Canada in Ottawa on Wednesday, March 6, 2024. THE CANADIAN PRESS/Sean Kilpatrick
OTTAWA – 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.
Economic data since January has increased the central bank’s confidence that inflation will continue to slow even as economic growth picks up, governor Tiff Macklem said.
While the Bank of Canada’s conditions to begin lowering interest rates have been met, it needs to see price pressures ease for longer to make sure the decline in inflation is sustained.
“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.”
Economists were widely expecting the central bank to hold its key rate on Wednesday and deliver a rate cut at its next policy announcement in June.
Canada’s inflation rate slowed to 2.8 per cent in February, while measures of underlying price pressures have also eased.
The central bank has been particularly focused on measures of core inflation, which gauge underlying price pressures by stripping out volatile price movements.
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.
This report by The Canadian Press was first published April 10, 2024.
