The Bank of Canada has held the key interest rate steady at 5% saying that inflation remains too high for it to begin cutting rates.
The move was widely expected by economists and marks the sixth time the Bank has held its key interest rate since July.
The Bank noted that while inflation remains too high, the Consumer Price Index (CPI) and core inflation, which removes the more volatile food and energy components, has eased in recent months.
CPI in Canada slowed to 2.8% in February while core measures of inflation slowed to just over 3%.
It said it is on the lookout for evidence this downward momentum is continuing.
“We need to be assured this is not just a temporary dip,” Bank of Canada governor Tiff Macklem said in a press conference following the announcement.
Macklem, when asked by reporters if a June rate cut is on the cards commented: “Yes, it is within the realm of possibilities. I think we have been pretty clear, we are encouraged by what we have seen since January.”
The Bank of Canada believes inflation will be close to 3% during the first half of 2024, below 2.5% in the second half of the year and reach central banks’ inflation target of 2% in 2025.
It has upped its global GDP growth forecasts for 2024 to 2.75% and 3% for 2025 and 2026.
Within Canada, it expects GDP growth of 1.5% in 2024, 2.2% in 2025, and 1.9% in 2026.
“Economic growth is forecast to pick up in 2024,” the Bank said, citing strong population growth, a recovery in household spending, residential investment, and increased government spending.