As was widely expected, the Bank of Canada held its trendsetting overnight interest rate at its current level of 5% and said that it is “too early” for the central bank to reverse its monetary tightening policy.
It was the fifth consecutive meeting that the Bank of Canada kept interest rates at current levels. The overnight interest rate has been at 5% since July 2023.
While acknowledging that inflation is moving lower, Bank of Canada Governor Tiff Macklem said that it is still “too early” for the central bank to start cutting interest rates.
“Today’s decision reflects governing council’s assessment that a policy rate of five per cent remains appropriate. It’s still too early to consider lowering the policy interest rate,” Macklem said at a news conference with media in attendance.
Canada’s inflation rate is currently at 2.9% and down from more than 8% in the summer of 2022. The central bank targets inflation at a 2% annualized rate.
Futures traders and economists are now divided over the timing of when the Bank of Canada will begin lowering interest rates, with traders expecting the first cut in July of this year and economists forecasting June as the start of the central bank’s easing cycle.
The Bank of Canada’s next decision on interest rates is scheduled for April 10.
