'We are getting closer' to cutting interest rates, Bank of Canada governor tells MPs

The Bank of Canada is get‐ ting closer to cutting in‐ terest rates as inflation shows signs of coming down and staying down, the central bank's gover‐ nor, Tiff Macklem, told MPs Thursday.

"We do see renewed downward momentum in un‐ derlying inflation. The mes‐ sage to Canadians is: we are getting closer. We are seeing what we need to see and we just need to be confident that it will be sustained," Macklem said during an ap‐ pearance before the House of Commons finance com‐ mittee.

Economic growth has stalled, there's an excess sup‐ ply of goods, wage increases have stabilized and the labour market has cooled "from very overheated lev‐ els," which has helped to bring down prices, Macklem said.

"Our key indicators of in‐ flation have all moved in the right direction," he said, pointing at data that strips out more volatile price swings, like food and energy prices.

The next opportunity for the central bank to possibly cut rates is June 5.

Macklem's upbeat tone could be good news for homeowners and would-be buyers who have been forced to buy or refinance a home with interest rates at 20-year highs.

He said the bank's current policy rate of five per cent has been "restraining" de‐ mand for homes.

But the Bank of Canada is now projecting "a strong pickup in housing over the course of this year" with "some increase in housing prices," Macklem said.

WATCH: Canada's infla‐ tion rate ticks up to 2.9% in March

Acknowledging that high‐ er rates have been hard on Canadians and some sectors of the economy like real es‐ tate, Macklem said the bank doesn't "want to keep mone‐ tary policy this restrictive for longer than we have to."

Macklem's relatively rosy outlook on rates differs somewhat from Jerome Pow‐ ell, the chair of the U.S. Fed‐ eral Reserve, the body that sets interest rates in that country.

The Fed held interest rates steady on Wednesday.

"Inflation is still too high," Powell said. "Further progress in bringing it down is not assured and the path forward is uncertain."

Worries about Canadian dollar

Macklem said there's a reason inflation has come down more here than in the U.S. - Canada's economy has been weaker than south of the border.

"We have our own cur‐ rency - we can run our own monetary policy," Macklem said, while adding that a deci‐ sion to cut rates while the U.S. stands pat could have an "impact on the Canadian dol‐ lar."

"If we move lower than the Fed, that will tend to de‐ preciate the Canadian dol‐ lar," he said.

That could be problematic for vacationers and frequent cross-border travellers, but a weaker loonie could also be a boon for the Canadian economy, as our exports be‐ come cheaper.