Experts believe the Bank of Canada’s recent rate hold is a further indication that Canadians may need to wait until the summer before seeing any mortgage relief.
On Wednesday, the Bank of Canada held its policy rate for the fifth consecutive time as it looks to bring inflation down to its target of two per cent. The move fell in line with economists’ unanimous expectations, as the central bank warns that it is still too early to begin cutting.
While some economists previously predicted an April date for the first cuts, most now believe it will be pushed back to June.
“Markets had priced in a June cut, that aligns with our forecast, so I think it is more of the same,” Dawn Desjardins, chief economist with Deloitte Canada, told BNN Bloomberg in a television interview on Wednesday. “We’re getting there, but we’re not there yet. So the bank, certainly, wants to lean against markets very aggressively, moving to mode of rate cuts that begin early and are sustained.”
Dominique Lapointe, director of macro strategy at Manulife Investment Management, said the Bank of Canada’s March statement “mimics” its previous one from January.
“There is an acknowledgement that wage pressure ‘may be easing,’” he wrote in a statement on Wednesday. “Inflation has moved in the right direction since the last decision (the January CPI print), but is still trending at a level uncomfortable for the (Bank of Canada).”
Lapointe expects the Bank of Canada to keep its interest rates at five per cent until “it sees more progress on inflation.”
“We continue to anticipate more pronounced weakness in the first half of 2024 with final domestic demand continuing to contract on the back of weak household consumption and business investment,” he wrote. “If that happens, the (Bank of Canada) would be in a position to signal a shift towards easing at the April meeting, preparing markets for a June cut.”
Ashish Utarid, assistant vice-president of investment strategy with IG Wealth Management, said he expects the central bank to begin cutting “in the near future.”
“There are clear signs the economy has shown signs of a slowdown since mid-last year,” he wrote in a statement Wednesday. “The Bank is currently proceeding with caution, struggling with the core inflation levels, which removes more volatile food and energy metrics.”
“These conditions make a strong case for a reduction in interest rates and the probability is growing that the Bank of Canada will move to loosen monetary policy by mid-year.”
Shannon Terrell, a spokesperson for NewdWallet Canada, also expects a summer rate cut.
"This rate hold reiterates the balancing act the bank faces: one of tempering inflation as it simultaneously aims to stimulate a fatigued economy,” she wrote in the Wednesday statement. “Relief from high rates may come as soon as the summer, but only if inflation continues to cool."
The Bank of Canada has scheduled its next interest rate announcements for April 10 and June 5.
With files from Bloomberg News
This is a corrected story. A previous version incorrectly referred to Dominique Lapointe as "she."