The Bank of Canada has decided to maintain the key interest rate at 5%, indicating that they view the current direction of economic conditions as positive

The Bank of Canada has opted to keep its key interest rate unchanged at 5% for the sixth consecutive time since July. The central bank emphasized the necessity of observing sustained signs of slowing inflation before considering any rate adjustments. Bank of Canada Governor Tiff Macklem highlighted the importance of monitoring recent declines in core inflation over an extended period to confirm whether they are temporary or indicative of a lasting trend. He mentioned the possibility of a rate reduction in June based on current economic trends.

Despite overall inflation moderating to 2.8% in February, specific factors like high rent and mortgage interest costs continue to exert upward pressure on inflation. The bank expects inflation to approach its 2% target this year and achieve it by 2025, driven by solid GDP growth resulting from population expansion and increased household spending.

Economists speculate that the Bank of Canada may initiate rate reductions starting at its next meeting in June, followed by gradual decreases thereafter. The divergence in economic data between Canada and the U.S. positions the Bank of Canada to lead in rate cuts, as the U.S. Federal Reserve appears less inclined to act in the near term based on recent inflation indicators. Governor Macklem downplayed the impact of U.S. inflation on Canada's monetary policy decisions.