Bank of Canada says it’s ‘too early’ to cut rates. Here’s what to expect
The Bank of Canada left its benchmark interest rate unchanged on Wednesday and signalled it’s still too soon to ease monetary policy despite recent cooling in inflation.
The central bank’s policy rate held at 5.0 per cent in the fifth consecutive decision, with the hold widely expected by economists.
The head of the Bank of Canada also said that it’s “too early” to cut interest rates until there’s more progress in taming core inflation, according to prepared remarks from Governor Tiff Macklem.
There have been “no big surprises” in the economic data since the central bank’s hold in January, he said, but underlying price pressures are “persisting.”
“We’ve come a long way in our fight against high inflation. Monetary policy is working—inflation is coming down. But it’s too early to loosen the restrictive policy that has gotten us this far,” Macklem said in his remarks.
“The assessment of governing council is that we need to give higher rates more time to do their work.”
The Bank of Canada’s policy rate sets the cost of borrowing for institutions across the country and informs interest rates Canadians pay on debt, including mortgages and other credit products.
Efforts to tame inflation in the current tightening cycle began just over two years ago and saw the Bank of Canada raise its policy rate by 4.75 percentage points over the course of 10 hikes.
Officials at the central bank have signalled that the benchmark rate might now be high enough, shifting discussions now to how long the rate needs to stay elevated to bring inflation all the way back down to the Bank of Canada’s mandated two per cent target.
Annual inflation cooled more steeply than expected in January, declining to 2.9 per cent from 3.4 per cent the previous
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