The Bank of Canada rate cuts might be approaching soon for the country. However, the BoC cannot seem to come to an agreement. This comes after their recent discussions before the March 6 interest rate announcement.
BoC Rate Cuts: When is it Happening?
The summary mentions that the council members have come to an agreement that if the economy and inflation go as the Bank of Canada expects, they can start lowering interest rates this year.
However, they all seem to have different opinions on when the conditions for lowering rates will be met. They are looking for more signs of inflation going down before introducing BoC rate cuts.
In summary, it was mentioned that the council members have different opinions on when there would be enough signs that showed the inflation is consistently and sustainably decreasing and BoC rate cuts can be introduced without any risks.
The Bank of Canada had decided to keep its interest rate at 5% at the beginning of March and has not given any specifics on when rate cuts might happen.
Governor Tiff Macklem mentioned that the bank wants to avoid rushing into changes and then having to change direction later. The U.S. Federal Reserve also announced on Wednesday that it will be keeping its main interest rate the same for the 5th meeting in a row.
According to central bank officials, the Fed rate cuts might happen three times in 2024, even though inflation has remained higher than expected at the start of 2024. They expect fewer rate cuts in 2025 and have slightly raised their inflation predictions.
Unlike the US Federal Reserve, no information about the BoC rate cuts has been given. However, Macklem has talked about the possibility that the bank will not lower the interest rates as quickly as it had raised them.
The recent data in Canada has shown that the yearly inflation rate was lower than predicted for the second month in a row, hitting 2.8% in February. This prediction helps the economists’ predictions that Bank of Canada rate cuts might be happening around mid-year.
BoC has been showing concerns about inflation rising higher than what was predicted, especially with the increase in shelter costs.
The summary also mentioned that if the housing market starts increasing in the spring, it could increase the shelter price inflation, resulting delay in the CPI data to reach the 2% target. If inflation continues to remain high, the central bank might need to keep monetary policy more restrictive for a longer period.
One of the factors that is influencing the BoC rate cuts is the risk of a rebound in the housing market. Even though the prices of houses were decreasing prices in January, there was a recent increase in home resales which could lead to an increase in house prices.
The shelter costs were reported to have increased by 6.5% in February, compared to the previous year, with mortgage interest costs and rent being the main factors causing the increase in inflation that month.
The Bank of Canada’s next interest rate announcement date is set for April 10.
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