BoC Governing Council divided over timing of rate cuts, but agree they will be gradual


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The Bank of Canada’s Governing Council remains split over when they think conditions will be right to begin lowering the country’s key interest rates.

Once they begin, however, the council is in agreement that the cuts will be delivered gradually.

That’s according to the latest summary of deliberations from the Bank of Canada’s April 10 monetary policy meeting, where its six-member Governing Council unanimously voted to leave the benchmark rate unchanged at 5.00%.

The Governing Council members agreed that there had been additional progress in core inflation and in key indicators of underlying inflation.

“In its communications on the previous two interest rate decisions, Governing Council had stressed it was looking for ‘further and sustained easing in core inflation,’” the summary reads. “Members agreed that the decline in core inflation in January and February was ‘further’ easing, and they wanted to see this easing ‘sustained.’”

The summary noted that some members were focused on upside inflation risks, in particular stronger-than-expected inflation readings in the U.S. and better-than-expected economic growth in Canada.

Others highlighted the significant progress made in bringing inflation down from its peak of 8.1% in June 2022, along with excess supply expected to keep downward pressure on inflation going forward.

Current expectations among markets and economists are that the Bank is likely to deliver its first quarter-point rate cut at either its June 5 or July 24 monetary policy meetings. That would bring the Bank’s benchmark rate down to 4.75%, a level last seen in June 2023.

The Bank’s Governing Council members were in agreement that easing to the overnight target rate would “probably be gradual, given risks to the outlook and the slow path for returning inflation to target,” the summary noted.

BMO economist Benjamin Reitzes noted that a fourth-straight “subdued” inflation report in May would mean the Bank of Canada would “strongly consider” cutting rates at its June meeting.

“Beyond that, it’s clear that rate cuts will be gradual, and that the BoC is in no rush to get back to neutral,” he added.


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