Bank of Canada holds key rate, but signals June cut in ‘realm of possibilities’

globalnews.ca:

The Bank of Canada held its benchmark interest rate steady on Wednesday amid signs that inflation is easing, with officials acknowledging that a rate cut in June is “within the realm of possibilities.”

The central bank’s policy rate, which informs lending rates on key products like Canadian mortgages, remains at 5.0 per cent for the sixth straight decision.

The hold was widely expected by economists amid signs price pressures are easing, growth in the economy has stalled and the once-tight labour market is softening.

Bank of Canada governor Tiff Macklem said in prepared remarks accompanying the rate decision that recent data has given the central bank more confidence that “inflation will continue to come down gradually even as economic activity strengthens.”

“Our key indicators of inflation have all moved in the right direction,” he said.

The Bank of Canada’s rate tightening cycle began more than two years ago in an effort to rein in decades-high levels of inflation.

Annual inflation has cooled significantly since then, last coming in at 2.8 per cent in February.

The central bank signalled inflation might be cooling faster than previously expected in an updated monetary policy report released on Wednesday. While that forecast still sees inflation to return to its two per cent target in 2025, it now calls for inflation to cool to 2.2 per cent by the end of 2024, down from previous expectations for 2.4 per cent.

The Bank of Canada’s preferred metrics of core inflation have also begun to ease lately, hovering above three per cent in February.

The central bank acknowledged this progress in its statement accompanying the rate decision on Wednesday, but said it was still looking for evidence that “downward momentum is