In a move that was more or less expected amongst economists, the Bank of Canada (BoC) has opted to hold its policy interest rate steady at 5%. This is the sixth straight meeting that has culminated in a hold, after the bank delivered a 25-point-hike last July.

Although inflation has been on a downtrend for months now, falling to 2.8% in February after coming in at 2.9% in January and 3.4% in December, Governing Council said in a statement on Wednesday morning that, weighing the potential risks to inflation, they felt it “appropriate” to maintain the policy rate at this time.

“Inflation could be higher if global tensions escalate and this boosts energy prices and further disrupts international shipping. House prices in Canada could rise faster than expected. And wage growth could remain high relative to productivity,” BoC Governor Tiff Macklem said. “We don’t want to leave monetary policy this restrictive longer than we need to. But if we lower our policy interest rate too early or cut too fast, we could jeopardize the progress we’ve made bringing inflation down.”

“I realize that what most Canadians want to know is when we will lower our policy interest rate. What do we need to see to be convinced it’s time to cut?” Macklem later said. “The short answer is we are seeing what we need to see, but we need to see it for longer to be confident that progress toward price stability will be sustained. The further decline we’ve seen in core inflation is very recent. We need to be assured this is not just a temporary dip.”

Although the BoC is yet to say anything concrete about the timing of future rate cuts, they have contributed their two bits to the rate cut conversation, saying in their last summary of deliberations that “conditions for rate cuts should materialize over the course of this year.”

According to those deliberations, which were made public on March 20, there remains some “diversity of views” amongst members of Governing Council pertaining to “when there would likely be enough evidence that these conditions were in place” and “how to weight the risks to the outlook.”

Nonetheless, there has been a revolving door of conjecture amongst economists about when the first rate cut will come, with one of the more recent predictions coming from TD Economist Rishi Sondhi, who wrote in a housing market outlook on Monday that the Bank is expected to kick rate cuts off at their July 24 meeting.

RBC Economist Robert Hogue chimed into the rate conversation as well this week, writing in a new report that the BoC “has likely done enough to win its battle against inflation,” and that the first cut is likely around mid-year. Hogue added that RBC’s forecast is that the policy interest rate will be brought down by 100 basis points to 4% by the end of 2024, and by an additional 100 points to 3% in 2025.

“The outlook for long-term rates is more tempered, in part because bond markets have already priced in future central bank cuts,” Hogue also said. “Our rate forecast has five-year Government of Canada bond yields easing a total of about 75 basis points by early 2025. This would pave the way for moderate mortgage rate drops but affordability will still be a significant challenge.”

The next BoC rate announcement is scheduled for Wednesday, June 5, 2024.