BoC holds policy rate again, but June rate cut possible

The Bank of Canada is keeping the door open to an interest rate cut in June even as it emphasized that it won’t be rushed into it if inflation shoots back up.

“Yes, it’s within the realm of possibilities,” governor Tiff Macklem said in response to a question about the possibility of a rate cut at its June 5 announcement.

The Bank of Canada kept its key interest rate at five per cent Wednesday — marking the sixth consecutive hold — and said that it has begun to see the economic conditions it deems necessary for lower interest rates.

Economic data since January have increased the central bank’s confidence that inflation will continue to slow even as economic growth picks up, Macklem said.

But the central bank wants more certainty before pulling the trigger on rate cuts.

“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 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 Bank of Canada’s latest announcement suggests although the central bank is largely encouraged by the progress made so far on the inflation front, it plans to continue taking a cautious approach with its monetary policy decisions.

Economists reacting to Wednesday’s news continue to expect the central bank to begin lowering its policy rate around the middle of the year, with many leaning toward June.