Bank of Canada is not showing much urgency in launching the first cut in this rate cycle, as it expects economic growth to return after the mid-year while inflation is still considered “persistent” and is only forecasted to gradually returning to 2% next year.

Post-meeting statement

The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening.

On economic growth

In Canada, the economy has stalled since the middle of 2023 and growth will likely remain close to zero through the first quarter of 2024.


Economic growth is expected to strengthen gradually around the middle of 2024. In the second half of 2024, household spending will likely pick up and exports and business investment should get a boost from recovering foreign demand.

On inflation

Shelter costs remain the biggest contributor to above-target inflation. The Bank expects inflation to remain close to 3% during the first half of this year before gradually easing, returning to the 2% target in 2025.

The Council is still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation.

Press Conference

In the opening speech of the press conference, Governor Macklem said the “Governing Council’s discussion of monetary policy is shifting from whether our policy rate is restrictive enough to restore price stability, to how long it needs to stay at the current level


Macklem insisted that “overnight interest rate is still the main monetary policy tool”. Balance sheet size is still larger than the bank’s estimate for appropriate size by quite a bit.

The bank estimated that steady-state level of balance sheet will likely be in a range of CAD 20 billion to CAD 60 billion, or 1% —2% of the country’s GDP, according to Deputy Governor Toni Gravelle’s speech in March last year.

On whether rate cut is only option for next step

“The risk of a rate hike is not zero”, he said during press conference but added that “this is not our base case” and “we are confidence that we have raised rate high enough”.

On timing of rate cut

“We can’t give a specific date for rate cut” given that there are many “push and pull” and mixed signals in the inflation data, said Senior Deputy governor Carolyn Rogers.

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