Rate cut timing ‘difficult to foresee’ amid inflation pressures: Bank of Canada
Posted February 7, 2024 1:34 pm.
Last Updated February 7, 2024 2:33 pm.
The Bank of Canada isn’t sure when it will be able to start cutting interest rates as it continues to contend with inflation that’s still too high and broad-based, its summary of deliberations of its Jan. 24 rate decision reveals.
“While (the governing council) could not rule out further policy rate increases in the event of new inflationary surprises, members agreed that future policy discussions would likely shift to how much longer to maintain the policy rate at five per cent to sustain the disinflationary process,” the summary said, echoing prior comments from governor Tiff Macklem.
“They recognized that, based on the information that was available, it was difficult to foresee when it would be appropriate to begin cutting interest rates.”
The central bank held its key rate at five per cent last month, giving higher interest rates more time to slow the economy and ease price pressures.
Inflation has fallen considerably over the last year and a half – reaching 3.4 per cent in December – but the summary notes prices for many goods and services are still rising at an abnormally fast pace.
“Prices for just over half of CPI components were growing at a rate above three per cent, indicating that the drivers of too-high inflation continued to be broad-based,” the summary said.
Financial markets are anticipating the Bank of Canada will begin cutting interest rates as early as April.
