The economic stars appear to be aligning for the Bank of Canada to deliver an interest rate cut on Wednesday, but some economists warn the central bank might have other ideas when it comes to the right timing for the hotly anticipated first cut of the cycle. The Bank of Canada has kept its policy rate – the benchmark rate for major Canadian loans like mortgages as well as borrowing costs for businesses and governments – on hold at 5.0 per cent since July 2023.
Higher interest rates discourage spending and slow growth, which takes away some inflationary fuel out of the economy. Governor Tiff Macklem said at the central bank’s last rate decision in April that an initial cut at the upcoming meeting in June would be “within the realm of possibilities.” That was dependent, he said, on whether inflation and other economic indicators continued to decline according to the Bank of Canada’s expectations.
Story continues below advertisement Since that time, inflation has continued to ease. The April reading showed annual inflation had cooled to 2.7 per cent from 2.
9 per cent in March , for instance, with the central bank’s preferred metrics of core inflation also showing signs of slowing. That comes despite persistent pressure in shelter inflation pushing up the headline number. On Friday, Statistics Canada’s latest real gross domestic product report showed a steeper slowdown than most economists – and the Bank of Canada – were expecting.
1:47 Canada’s GDP grew 1.7.