BOC leaves the interest rate the same OTTAWA—The Bank of Canada left its benchmark interest rate unchanged for a sixth consecutive time at 5%, and said a cut in June is possible so long as incoming data assures officials that downward momentum in inflation is sustainable.
A June rate cut is “within the realm of possibilities,” Gov. Tiff Macklem said at a press conference Wednesday following the release of the central bank’s decision. He said the timing of future rate cuts were discussed among senior officials in deliberations ahead of Wednesday’s policy announcement.
The central bank said price growth is slowing across most major categories. It said it expects inflation to remain around 3% in the coming months and drop below 2.5% in the second half of the year. Canada’s central bank sets rate policy to achieve and maintain 2% inflation, a level it expects to reach in 2025. Recent data indicate inflation decelerated for two straight months and now sits at 2.8%, or the upper end of the central bank’s 1% to 3% target range.
“We are seeing what we need to see,” Macklem said. “But we need to see it for longer to be confident that progress toward price stability will be sustained.”
The Bank of Canada’s decision and Macklem’s comment indicate the central bank is inching toward rate cuts yet remains in a wait-and-see approach. Statistics Canada is scheduled to release two sets of monthly inflation data, with the first coming next week, before the central bank issues its next rate-policy decision on June 5.
“We don’t want to leave monetary policy this restrictive longer than we need to,” Macklem said. “If we lower our policy interest rate too early or cut too fast, we could jeopardize the progress we’ve made bringing inflation down.”
The U.S. reported Wednesday that the consumer-price index climbed at a faster-than-expected 3.5% pace in March, potentially weakening the case for the Federal Reserve to begin cutting rates by midyear.
All 12 economists surveyed last week by The Wall Street Journal predicted no change in the Bank of Canada’s target for the overnight rate. Nine of those economists added they expect a rate cut at the central bank’s June 5 decision.