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The latest on Bank of Canada's April 10 interest rate decision

The Bank of Canada kept its policy interest rate at 5 per cent for the sixth consecutive time and offered no timeline for rate cuts. But Governor Tiff Macklem said he was more confident that inflation is heading back to the bank’s target – a dovish tilt that may open the door to rate cuts this summer.

The bank downgraded its forecast for inflation while upgrading its forecast for economic growth.

Further reading:

Find updates from our reporters and columnists below.

12:45 p.m.

What’s next?

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Deputy Governor Carolyn Rogers looks on as Bank of Canada Governor Tiff Macklem speaks during a news conference following a today's rate announcement.Adrian Wyld/The Canadian Press

The Bank of Canada’s next interest rate decision is on June 5.

The BoC will publish its annual Financial System Review on May 9. This contains the bank’s assessment of financial vulnerabilities, including stress in the global banking system and high levels of household debt.

Statistics Canada will publish March inflation data on April 16. February GDP numbers will be released on April 30.

The U.S. Federal Reserve will deliver its next interest rate decision on May 1. It is widely expected to hold the Federal Funds rate steady at between 5.25 per cent and 5.5 per cent.

Mark Rendell

12:25 p.m.

Traders bets on a June rate cut continue to fluctuate

Market bets for when monetary easing will arrive in Canada fluctuated widely in trading this morning.

Immediately after the 9:45 a.m. ET policy statement, implied probabilities in swaps markets were pricing in about a 42-per-cent odds of a June cut.

Those bets quickly rose during Tiff Macklen’s press conference, in which he stated that a June rate cut was still “within the realm of possibilities.”

Following the press conference odds reached about a 52-per-cent chance of a rate cut in June, according to Refinitiv Eikon data.

That’s down from about 70-per-cent odds coming into today.

Markets are now pricing in odds of a cut arriving in July at about 74 per cent, similar to where they stood coming into today.

The central bank’s decision arrived shortly after the U.S. released higher-than-expected inflation figures at 8:30 a.m. ET. The data sent the U.S. dollar spiking, pushing the Canadian currency down about half a cent US, and it slipped further later to a four-and-a-half-month low to below 73 cents US.

Bond yields in both Canada and the U.S. rose sharply after the U.S. data and at last check the two-year yields were up about 18 basis points - a large one-day move. Canada’s five-year yield was up 14 basis points at 3.732 per cent, nearing its high of February. All this suggests fixed mortgage rates will see some upward pressure in the days ahead.

Darcy Keith

11:33 a.m.

How the timing of interest rate cuts could affect your U.S. vacation

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If you have a big U.S. trip planned in the near future, it may be a good idea to hedge your currency risk, writes Erica Alini.Andrew Kelly/Reuters

Markets may have slightly trimmed their bets on a first Bank of Canada interest rate cut coming in June, but the odds remain high that borrowing costs will begin to come down in Canada before they do in the U.S.

In today’s announcement Canada’s central bank noted inflation continues to trend lower but also cautioned it wants to see evidence that progress is sustained. Traders seem to take that as a cue that the first rate cut may have to wait until July, rather than June.

But data released this morning showing U.S. inflation remains stubbornly high raises the odds that Canada’s central bank will nonetheless begin to lower rates before the Federal Reserve does. That would weaken the Canadian dollar against the U.S. dollar, a prospect that Canadians travelling south in the next few months might want to keep in mind.

A weaker loonie may not be something to fret over if you’re only planning a short trip to the U.S., but for an expensive vacation, it could make a palpable difference.

Of course, trying to time the exchange rate is never a good idea. There are countless factors affecting currency values that regularly upset the expectations of even sophisticated currency traders. Individual travellers have little hope of accurately predicting currency swings.

Still, if you have a big U.S. trip planned in the near future, it may be a good idea to hedge your currency risk. A simple way to do that would be to pay for at least part of your bookings when the exchange rate seems favourable in the next little while to avoid the risk of being stuck with the full bill at a time when the loonie is weaker.

Buying some U.S. currency ahead of your travels at a reasonably good rate can also lessen that risk. You could do that with a Wise card, which uses the exchange rate banks use to sell currency to one another. Forex dealers can also offer competitive rates.

If you’re exchanging a larger amount of currency, it’s worth shopping around for the best conversion rate and lowest fees.

Keep in mind also options like EQ Bank and Wealthsimple Cash cards to avoid the 2.5 per cent foreign currency conversion fee that most credit cards charge for purchases outside Canada on top of the typical conversion costs.

Erica Alini

11:25 a.m.

Economists react to the latest Bank of Canada decision

James Orlando, director and senior economist, TD Economics

“The BoC remains steadfast in its desire to maintain rates at the current 5% level. It can justify this stance based on its upgrade to economic growth, while still expecting inflation to remain somewhat elevated over the coming months. …

Market pricing is still holding on to hope for a June cut but July (our call) is becoming more likely. Even though inflation has moved within the BoC’s 1% to 3% target range over the last few months, markets have become more cautious on the timing of cuts. While some of this is coming from the inflation warning in recent U.S. CPI prints, strong Canadian economic growth to start 2024 has been the main driver. And while spending data have been encouraging, we question how long this will last, especially with the labour market having started to come under pressure in March. Should economic growth weaken further and inflation remain on its current trajectory, we could see the BoC readying markets for the cuts in short order.”

Benjamin Reitzes, managing director, Canadian rates and macro strategist, Bank of Montreal

“The Bank of Canada was mildly more dovish, noting the encouraging core inflation trend and softening labour market. However, policymakers need more evidence that this trend will continue before they’re willing to start easing. While June is still on the table, the coming CPI reports will need to be at least as good as what we saw in January and February. With the Fed seemingly on hold for potentially longer after a string of firm CPIs, the BoC will likely be a bit more cautious on the margin with rate cut timing. ... With this morning’s strong U.S. CPI, the BoC is going to have to keep a close eye on USD/CAD. There’s a limit to how far the BoC and Fed can diverge and the C$ will be a big determinant of that. The last thing the BoC wants is to cut too aggressively, have the loonie tank, and spark imported inflation.”

Taylor Schleich and Jocelyn Paquet, economists with National Bank Financial

“This was a pretty balanced statement and clearly reflects what has been very encouraging inflation data in the last two months. While there was nothing that explicitly stated rate cuts are now on the table, this is effectively what was communicated in the rate statement and even more so in the opening statement to the press conference. Indeed, Macklem said they’re already ‘seeing what [they] need to see’ when it comes to determining when rate cuts will be appropriate. They just need to see it play out for longer. That clearly puts June on the table for a potential cut with two CPI reports due to be released before that decision. That said, they’ve clearly left themselves plenty of flexibility if the data doesn’t remain as soft as it has been in the last two months. We by no means see June as a slam dunk for a rate cut and instead would deem it more of a coin toss. Simply put, it’s going to be all about the data over the coming months.

Read how markets and economists are reacting to today’s Bank of Canada decision.

Darcy Keith

11:15 a.m.

Timeline: A history of Bank of Canada’s key interest rate decisions

11:10 a.m.

Rogers: Disruptions in global shipping routes, housing prices are risks to inflation

Rogers: “If there’s further disruption to shipping lanes, or if some of the global tensions that we see now escalate, that could have an impact both on supply chains and on commodity prices. So it’s definitely one of the risks [for the inflation outlook]. It’s listed alongside housing prices that we were just asked about a few minutes ago.”

Matt Lundy

10:55 a.m.

Macklem, Rogers weigh in on inflation, population growth and housing prices

Macklem: “Look, we are seeing what we hoped and we need to see [on inflation]. We just need to see it for longer to be confident that we are clearly on a path to 2-per-cent inflation. And when we are at that point, it will be appropriate to reduce our interest rate.”

Macklem says “the main factor” in a stronger economic forecast is population growth, particularly in the first half of the year. “As you get later in the year and into 2025, we’ve actually revised [growth] down because the government has announced caps on non-permanent residents.”

Senior deputy governor Carolyn Rogers: “We do expect some pick-up in house prices. As long as the demand for housing outstrips supply, there will always be the potential for pressure on housing prices. So we have forecast some increase.”

Macklem: “We did discuss when to reduce our policy interest rate” in the deliberations for Wednesday’s decision.

Matt Lundy

10:45 a.m.

When will the Bank of Canada cut rates? Macklem says June is ‘within the realm of possibilities’

Tiff Macklem on the potential for a June rate cut: “Yes, it’s within the realm of possibilities.”

Matt Lundy

10:42 a.m.

Key quotes from Macklem’s press conference opening statement

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Bank of Canada Governor Tiff Macklem during a press conference at the Bank of Canada in Ottawa on Wednesday, March 6, 2024.Sean Kilpatrick/The Canadian Press

BoC has increasing confidence inflation is heading back to target

“We also concluded that, overall, the data since January have increased our confidence that inflation will continue to come down gradually even as economic activity strengthens. Our key indicators of inflation have all moved in the right direction and recent data point to a pickup in economic growth.”

Policy makers remains wary of cutting too early

“We don’t want to leave monetary policy this restrictive longer than we need to. But if we lower our policy interest rate too early or cut too fast, we could jeopardize the progress we’ve made bringing inflation down.”

When will the BoC cut rates?

“I realize that what most Canadians want to know is when we will lower our policy interest rate. What do we need to see to be convinced it’s time to cut? The short answer is we are seeing what we need to see, but we need to see it for longer to be confident that progress toward price stability will be sustained. The further decline we’ve seen in core inflation is very recent. We need to be assured this is not just a temporary dip.”

Inflation is heading in the right direction, but there are risks

“Looking ahead, we expect core inflation to continue to ease gradually. The more timely three-month rates of core inflation fell below 3 per cent in February, suggesting some downward momentum. But with gasoline prices rising, CPI inflation is likely to remain around 3 per cent in the coming months. It is then expected to ease below 2.5 per cent in the second half of this year and reach the 2-per-cent target in 2025.

As always, there are risks around our forecast. Inflation could be higher if global tensions escalate and this boosts energy prices and further disrupts international shipping. House prices in Canada could rise faster than expected. And wage growth could remain high relative to productivity. On the downside, economic activity globally and in Canada could be weaker than expected, cooling demand and inflation too much.”

Economic growth is expected to pick up

“In Canada, growth stalled in the second half of last year and the economy moved into excess supply. The labour market also cooled from very overheated levels. With employment growing more slowly than the working-age population, the unemployment rate has risen gradually over the last year to 6.1 per cent in March. There are also some signs that wage pressures are beginning to ease.

Economic growth is forecast to strengthen in 2024. Strong population growth is increasing consumer demand as well as the supply of workers, and spending by households is forecast to recover through the year. Spending by governments also contributes to growth, and U.S. strength supports Canadian exports.

Overall, we forecast GDP growth in Canada of 1.5 per cent this year and about 2 per cent in 2025 and 2026. The strengthening economy will gradually absorb excess supply through 2025 and into 2026.”

Mark Rendell

10:41 a.m.

Analysis: Canada is approaching a Goldilocks scenario

Canada is approaching a Goldilocks scenario: The outlook is stronger for economic growth and weaker for inflation, according to the Bank of Canada’s latest projections.

In its latest Monetary Policy Report, the bank upgraded its forecast for economic growth in 2024 to 1.5 per cent, nearly double the figure from January, while inflation will average 2.6 per cent this year, edging down from 2.8 per cent.

While some parts of the economy are stumbling – notably, the labour market – strong population growth has propped up consumption, and a vibrant U.S. economy is creating favourable conditions for cross-border trade.

Still, that leaves the question on everyone’s minds: When are interest rates getting cut?

As usual, caution is the prevailing vibe from central bankers. The Bank of Canada removed a reference that its rate-setting council was “still concerned” about inflationary risks in its press release for Wednesday’s decision, which held the benchmark interest rate at 5 per cent, as expected.

Bank of Canada Governor Tiff Macklem said that inflation was heading in the right direction, and that recent figures have increased the central bank’s confidence that the trend will continue. Still, the bank wants to make sure this isn’t a temporary bit of good news.

“What do we need to see to be convinced it’s time to cut? The short answer is we are seeing what we need to see, but we need to see it for longer to be confident that progress toward price stability will be sustained,” Mr. Macklem said in prepared remarks for his opening statement on Wednesday.

That’s probably not what the average mortgage holder wants to hear. But central bankers – not solely those in Canada – have been quite clear that they’re wary of cutting rates, only for inflation to flare up.

Consider what happened in the U.S. this morning. It reported another set of scorching inflation numbers that aren’t conducive to loosening monetary policy. Inflation is heading in the wrong direction in the U.S., even with rates at restrictive levels.

The Bank of Canada’s next decision is on June 5. Between now and then, it will have two inflation reports to chew on before deciding whether it’s appropriate to cut rates at the next opportunity.

Matt Lundy

10:35 a.m.

How bond markets are reacting to today’s BoC decision

A busy day in domestic bond markets actually started with U.S. consumer price index data at 8:30. Stronger-than-expected U.S. CPI data sent the Government of Canada two-year bond yield higher by 10 basis points to 4.28 per cent by 8:35 – U.S. bond yields historically drag domestic yields higher. The two-year yield settled at 4.29 per cent ahead of the expected stand-pat decision by the Bank of Canada. The yield increased marginally to 4.33 per cent as of 10:15.

The five-year bond yield action was similar. The U.S. data release sent the yield from 3.60 per cent to 3.69 as of 8:35. The change after the Bank of Canada announcement was much smaller at about two basis points to 3.71 per cent at 10:15.

The bond market today is a good reminder that an economic data surprise from the U.S., particularly concerning inflation, can create a bigger reaction in Canadian bond markets than Bank of Canada decisions that are expected.

Scott Barlow

10:32 a.m.

Bank of Canada downgrades inflation forecast, upgrades economic growth outlook

The Bank of Canada downgraded its forecast for inflation and upgraded its outlook for economic growth in its quarterly Monetary Policy Report, published Wednesday.

Bank economists now see inflation averaging 2.6 per cent this year, down from the previous estimate of 2.8 per cent.

Inflation is projected to remain close to 3 per cent in the second quarter of 2024, partly as a result of rising oil prices. It is then expected to move below 2.5 per cent in the second half of the year, led by slower price growth for shelter and food. The bank expects inflation to reach its 2-per-cent target in 2025.

Meanwhile the bank increased its forecast for economic growth. It revised its estimate for annualized GDP growth in the first quarter to 2.8 per cent from 0.5 per cent. And it upgraded its 2024 GDP forecast to 1.5 per cent from 0.8 per cent.

Much of this revision is being driven by stronger-than-expected population growth, which has continued to drive overall economic growth even as GDP-per-capita has declined over the past 18 months. Economic growth has also received a boost from the exceptionally strong U.S. economy, which has supported Canadian exports, as well as several idiosyncratic factors, such as the end of public sector strikes in Quebec.

Looking forward, growth will be supported by the completion of the Trans Mountain pipeline extension, increased residential housing investment and high levels of government spending.

Mark Rendell

10:25 a.m.

BoC decision continues to fuel prospective demand for real estate

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Prospective homebuyers have been gaining confidence to enter the housing market, as the Bank of Canada keeps its benchmark interest rate of 5 per cent steady since last summer.Sean Kilpatrick/The Canadian Press

The Bank of Canada’s decision to leave its benchmark interest rate unchanged again will continue to fuel prospective demand for real estate.

Would-be buyers have been gaining confidence to enter the market, as the central bank has kept its benchmark interest rate of 5 per cent steady since last summer.

In prepared remarks ahead of today’s press conference, Governor Tiff Macklem said he was growing confident that inflation was coming down.

However, the interest rate announcement said “higher mortgage costs and rental rates are contributing to shelter price inflation.”

Even though fixed-mortgage rates have started to decline, it is still too high for many borrowers to make their monthly payments. (The typical five-year fixed mortgage now has an interest rate of just above 5 per cent, compared with above 6 per cent in December.)

Robert Kavcic, senior economist with Bank of Montreal, said there is “plenty of pent-up demand out there that will be given more confidence to buy” when the central bank starts to cut interest rates. But he said it will “still be challenging” for borrowers.

Although home prices have started to increase in major markets, activity is slower after the brief spurt in sales at the end of last year.

National home sales fell from January to February. And in Toronto, the country’s largest real estate market, sales dropped in February and March.

Keisha Johnson, a mortgage broker with RTS Mortgage Financial, said prospective homebuyers are split into two camps.

One group is waiting for the potential rate cuts and the other group wants to act now before the bank cuts interest rates and fuels another real estate frenzy. “For them, the priority is to seize any potential opportunities available in the market at present,” she said.

The steady benchmark rate has given current mortgage borrowers time to adjust to the higher borrowing costs.

Rachelle Younglai

10:21 a.m.

Markets react to the latest BoC decision

Traders significantly reduced their bets on a rate cut by the Bank of Canada arriving in June following today’s rate decision and outlook, as well as a U.S. inflation report that came in hotter than expected. Implied probabilities in swaps markets now suggest about a 42 per cent chance of a rate cut in June, down from about 70 per cent earlier this morning, according to Refinitiv Eikon data.

Markets are now pricing in odds of a cut arriving in July at about 68 per cent, down from about 80 per cent before the bank’s announcement.

The central bank’s decision arrived shortly after the U.S. released inflation figures at 8:30 am ET. The data sent the U.S. dollar spiking, pushing the Canadian currency down about half a US cent, and it held there as the BoC decision came out. Bond yields in both Canada and the U.S. rose sharply after the U.S. data - at last check the U.S. two-year bond yield is up 18 basis points and the equivalent Canadian yield about up 14 basis points. Those are big one-day moves in credit markets. The U.S. inflation report also sent stocks lower on both sides of the border.

Only one or two quarter-point Fed rate cuts are now being priced into markets for this year.

Darcy Keith

10:10 a.m.

Analysis: Why the Bank of Canada is closely watching the unemployment rate

The most interesting number in personal finance right now is not the Bank of Canada’s overnight rate, which will stay put until at least June 5 or July 24. Those are the next two dates for the central bank to make any needed rate adjustments.

For immediate relevance, try the unemployment rate. The Bank of Canada has to be watching this number closely because it sends a strong message about what’s happening in the economy. Also, people in the business of lending money for mortgages and other purposes see the unemployment rate as a key indicator of how much stress people face in repaying what they owe.

The story told by the unemployment rate lately is that the economy is weakening. The jobless rate jumped to 6.1 per cent in March from 5.8 per cent in February and 5 per cent last April. The economy lost a net 2,200 jobs last month, and 60,000 more people were looking for work or on temporary layoff.

A weaker economy suggests inflation will be more subdued, a precondition for the Bank of Canada cutting rates and providing relief to overburdened borrowers. But a worsening job market hits home in a more direct way than even interest rate cuts do. Workers get laid off, hours of work get trimmed back, bonuses are reduced or shelved and promotions can be put on hold.

The small interest rate cuts expected this year will help lighten the load on people with various types of debt, notably variable-rate mortgages and home equity lines of credit. A weaker job market could hit harder and faster if it means less money coming in to service those debts and pay other expenses.

Personal finance talks a lot about reining in spending so you have money to save and invest. It’s not said often enough that bettering your employment situation is another way to increase prosperity. If the job market deteriorates, that avenue will be closed to many people.

Rob Carrick

9:45 a.m.

Bank of Canada holds rate steady, says it’s more confident in inflation easing

The Bank of Canada held its policy interest rate steady for the sixth consecutive time, but said that it is growing more confident that inflation is moving back to its target even as it upgraded its forecast for economic growth.

As widely expected, the bank’s governing council kept the overnight lending rate at 5 per cent, a level reached last summer after one of the most aggressive monetary policy tightening campaigns on record. High interest rates are designed to cool the economy and slow down inflation.

Bank of Canada Governor Tiff Macklem would not say when the bank will start lowering interest rates. But he said he’s growing more confident that price pressures will continue to ease, following surprisingly large declines in both headline and core inflation in recent months.

“We are seeing what we need to see, but we need to see it for longer to be confident that progress toward price stability will be sustained,” Mr. Macklem said, according to the prepared text of his press conference remarks. “The further decline we’ve seen in core inflation is very recent. We need to be assured this is not just a temporary dip.”

Read the full story on today’s BoC rate announcement.

Mark Rendell

9:20 a.m.

Other things to watch for today: BoC expected to publish a new neutral rate estimate

Alongside the rate decision, the Bank of Canada is also expected to publish an updated estimate of the “neutral rate.”

This is the bank’s estimate of where the policy rate would settle if inflation was on target and the economy was growing at full potential. Essentially it’s a Goldilocks level above which interest rates are considered to be restrictive and below which they are adding stimulus.

The bank currently estimates the neutral rate is somewhere between 2 per cent and 3 per cent. However, several top central bank officials have said over the past year that the actual range is likely slightly higher.

In a speech last summer, former deputy governor Paul Beaudry argued that “a base-case scenario where the real neutral rate remains broadly in its prepandemic range is possible, but the risks appear mostly tilted to the upside.”

The neutral rate is determined by slow-moving economic forces, such as demographics and patterns of savings, trade and investment. Mr. Beaudry said that most of these forces are changing in a way that would imply structurally higher interest rates in the future.

Canadian Imperial Bank of Commerce economists Avery Shenfeld and Ali Jaffery said in a note to clients that they expect the central bank to raise its neutral rate estimate by a quarter percentage point. But they cautioned against putting too much weight on this estimate as a guide to future monetary policy.

“Markets will likely make a bigger deal out of the Bank and eventually the Fed’s reassessment of neutral than they should,” Mr. Shenfeld and Mr. Jaffery wrote.

“But we don’t expect central bankers to show a lot of confidence in these estimates. The neutral rate is just one way to assess the stance of monetary policy, but it is just so imprecise that it can be just as much of a hazard as it can be a guide for policy.”

Mark Rendell

9:05 a.m.

U.S. inflation up again in March in latest sign that price pressures remain elevated

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U.S. consumer prices increased more than expected in March amid rises in the costs of gasoline and shelter.Peter K. Afriyie/The Associated Press

Consumer price increases in the U.S. remained high last month, boosted by gas, rents, and car insurance, the government said Wednesday in a report that will likely give pause to the Federal Reserve as it weighs when and by how much to cut interest rates this year.

Prices outside the volatile food and energy categories rose 0.4 per cent from February to March, the same accelerated pace as in the previous month. Measured from a year earlier, these core prices were up 3.8 per cent, unchanged from the year-over-year rise in February. The Fed closely tracks core prices because they tend to provide a good read of where inflation is headed.

The March figures – the third straight month of inflation readings well above the Fed’s 2 per cent target – threaten to torpedo the prospect of multiple interest rate cuts this year. Fed officials have recently made clear that with the economy healthy, they’re in no rush to cut their benchmark rate despite their earlier projections that they would reduce rates three times this year.

Read more from this month’s U.S. inflation report.

– The Associated Press

8:50 a.m.

Markets ahead of today’s Bank of Canada annoucement

Futures for Canada’s main stock index edged higher on this morning, ahead of the Bank of Canada’s next monetary policy decision and a key inflation reading in the United States, while a step-up in oil prices further lifted sentiment.

June futures on the S&P/TSX index were up 0.4 per cent at 6:57 a.m. ET, mirroring gains in their Wall Street peers.

The Bank of Canada’s next decision on interest rates is due at 9:45 a.m. ET on Wednesday, where the central bank is widely expected to hold rates at a 22-year high of 5 per cent.

In the run-up to the decision, the last pivotal dataset showed on Friday that Canadian unemployment was at a 26-month high of 6.1 per cent in March, cementing hopes for a rate cut in June.

– Reuters

8:25 a.m.

Bay Street betting on a June rate cut

Financial market participants see little chance of a rate cut today, but are betting that the Bank of Canada will start easing monetary policy in June.

Traders in interest rate swaps, which capture market expectations for monetary policy, put the odds of a quarter-point rate cut today at around 25 per cent, according to Refinitiv data. That rises to around 70 per cent for a rate cut in June.

Swap markets are pricing in three quarter-point rate cuts by the end of 2024.

Bay Street economists polled by Reuters offered a similar assessment. Twenty-seven of the 38 economists expected the first rate cut to come in June, while the remainder thought it would come in July or September.

The average estimate was for four interest rate cuts this year, although 14 out of 38 said the bank could cut less than that.

Mark Rendell

7 a.m.

Bank of Canada expected to hold rates, but could signal policy shift

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The Bank of Canada is widely expected to keep interest rates steady this week for the sixth consecutive time in today's decision.Blair Gable/Reuters

The Bank of Canada is expected to deliver another stand-pat interest rate decision today, but all eyes will be watching for signals about future rate cuts.

With the rate of inflation inching down toward the bank’s 2-per-cent target, and the economy struggling with high borrowing costs, most Bay Street analysts expect the bank to start easing monetary policy in the coming months.

The question is how much Governor Tiff Macklem wants to open the door to rate cuts in June or July.

Bank officials have kept the benchmark policy rate at 5 per cent, a two-decade high, since last summer. They said in January that interest rates are unlikely to go higher in this business cycle. But they’ve been unwilling to put a timeline on when rates will start coming down.

There are good reasons for Mr. Macklem to start sounding more dovish today. The past two inflation reports have seen annual Consumer Price Index growth back within the bank’s 1 per cent to 3 per cent target range. Core measures of inflation, which strip out volatile price movements, have been trending in the right direction.

Meanwhile, the labour market is clearly weakening, with the unemployment rate hitting 6.1 per cent in March – up a full percentage point over the past year.

Still, there’s an argument for Mr. Macklem to stick to his hawkish script.

Overall economic growth has come in above the bank’s estimates in recent months and oil prices have been stronger than expected. There’s also a risk that a shift in tone from the central bank could touch off a real estate frenzy, with many would-be buyers sitting on the sidelines, waiting for any hints that interest rates are coming down.

Keep your eyes on the final paragraph of the rate announcement. The past two announcements, in January and March, stated that the bank’s governing council “is still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation” and that it “wants to see further and sustained easing in core inflation.” If this language is watered down, it would be taken as a dovish tilt.

The bank will also release new inflation and economic growth forecasts in its quarterly Monetary Policy Report. If the inflation forecast is dialled back, that would suggest rate cuts could be just around the coroner.

Mr. Macklem and senior deputy governor Carolyn Rogers will give a press conference at 10:30 a.m. ET.

Read more about today’s Bank of Canada announcement.

Mark Rendell

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