The latest meeting minutes released by the Bank of Canada show that officials at the central bank are unsure when to start lowering interest rates.
A summary of the policy meeting held by the Bank of Canada’s governing council on Jan. 24 shows that officials are struggling with inflation that remains above its 2% annualized target.
“Members agreed that future policy discussions would likely shift to how much longer to maintain the policy rate at five per cent to sustain the disinflationary process,” read the meeting minutes released by the central bank.
The minutes also state: “Based on the information that was available, it was difficult to foresee when it would be appropriate to begin cutting interest rates.”
At its January meeting, the Bank of Canada elected to leave its trendsetting overnight interest rate at its current level of 5%, a 22-year high.
Inflation in Canada stood at 3.4% in December of last year, down from more than 8% in 2022 but still above the central bank’s target of 2% year-over-year growth in consumer prices.
The meeting notes also reveal that prices for many goods and services across Canada continue to rise at a fast clip and remain elevated.
“Prices for just over half of CPI components were growing at a rate above three per cent, indicating that the drivers of too-high inflation continued to be broad-based,” reads the meeting summary.
Futures traders are betting that interest rates have now peaked and that the Bank of Canada will begin cutting interest rates by the summer of this year.
Economists note that economic growth across Canada continues to weaken as inflation moves gradually lower, giving the Bank of Canada the flexibility to cut interest rates.
