Why it’s ‘too soon’ for the Bank of Canada to start cutting interest rates

The Bank of Canada held rates steady, again, for the fifth consecutive time to no one’s surprise (but disappointing perhaps for homeowners and others anxiously awaiting a cut).  

Its latest decision came even though the latest data from January shows inflation in Canada is slowing and is within the central bank’s target range of 1% to 3%, but not quite at its target of 2%. Still, Governor Tiff Macklem said that while it’s clear the central bank’s previous moves are working, it’s too early to cut the benchmark rate.  

Scotiabank’s Chief Economist Jean-François Perrault is back to break down the latest decision, what the Bank of Canada needs to see in order to start cutting rates and when a rate cut is likely at this point. 

Key moments this episode: 

00:56 — What have we learned from this latest announcement?  

1:43 — What numbers fed into this rate decision? 

3:08 — Why has it been so hard to get to that Bank of Canada inflation target? 

4:50 — If shelter costs are the most stubborn part of inflation, how much can the Bank of Canada move the needle? 

7:12 — Breaking down the conundrum around how inflation and shelter costs are related 

8:26 — What other risks could drive up inflation? 

10:05 — When might we see rate cuts? 

12:05 — What would need to happen for the Bank of Canada to begin interest rate cuts? 

13:24 — How does government spending factor into the Bank of Canada’s upcoming decisions? 

15:46 — It’s been about two years since the Bank of Canada began hiking rates. What have we learned since then? 

17:16 — The two things Canadians need to know after the decision today