Interest rates may be set to fall, but not quite yet.
The Bank of Canada on Wednesday held its key overnight lending rate steady for the sixth straight time at 5%, a more than two-decade high.
But the Bank’s accompanying commentary seemed to suggest it is edging toward the rate cut that many analysts and economists are expecting, potentially as early as June, as the national inflation slowed to 2.8% in February.
The Bank said easing price pressures is becoming more “broad-based” across goods and services, although it acknowledged housing inflation remains elevated, driven by growth in rent and mortgage interest costs. However, core measures of inflation - which had been running around 3½% - slowed to just over 3% in February, and three-month annualized rates are suggesting downward momentum, it said. Core inflation strips out the more volatile sectors, like food.
The Bank said it expects headline inflation to be close to 3% during the first half of this year, move below 2½% in the second half, and reach the 2% inflation target in 2025.
“While inflation is still too high and risks remain, (headline inflation) and core inflation have eased further in recent months. The Bank will be looking for evidence that this downward momentum is sustained.”
The Bank said it intends to keep a particularly close eye on core inflation.
In a press conference today, Bank of Canada Governor Tiff Macklem described a June rate cut as ‘within the realm of possibilities.”
Source : Syngenta.ca