The recent decision by the Bank of Canada to maintain interest rates at five per cent for the seventh consecutive announcement did not come as a shock to experts. However, they believe it signals potential cuts in the coming summer months.
Governor Tiff Macklem mentioned that while conditions for a rate cut are emerging, he prefers to observe sustained progress before implementing any reductions.
According to Warren Lovely, Chief Rates Strategist and Managing Director at National Bank Financial, the decision aligns with expectations and reflects a balanced approach from the central bank.
“The governor, the deputy governor, and the governing council have kept us on our toes in past decisions,” Lovely stated. “This one seems about down the middle of the fairway in terms of our own expectation.”
Lovely emphasized that the central bank is awaiting further evidence of sustained progress before considering rate cuts, particularly in light of evolving inflation trends.
Tu Nguyen, Economist at RSM Canada, anticipates the first rate cut to occur in June, citing the importance of timely action to address economic challenges.
Phil Mesman, Portfolio Manager and Co-head of Fixed Income at Picton Mahoney Asset Management, highlighted the complexities faced by the Bank of Canada in balancing inflation concerns with external factors, such as U.S. inflation data.
Brooke Thackray, Research Analyst at Horizons ETFs, acknowledged the pressure on the Bank of Canada due to persistent inflation but suggested that Macklem would require concrete evidence of inflationary control before initiating rate cuts.
Overall, experts anticipate potential rate cuts in the near future, with a consensus that the Bank of Canada will closely monitor economic indicators to inform its decision-making process.