INTEREST RATES | When should you expect Bank of Canada to cut rates?

I’m Marcia McMillan We Begin this hour with breaking news from Ottawa the Bank of Canada once again holding its key interest rate steady up 5% the rate hasn’t gone up since July but before that the bank raised its rate 10 times since early 2022 to slow down inflation

The inflation rate is now down to 3.4% forecasters still expect economic weakness will allow the central bank to start cutting rates with me now to discuss is B&M Bloomberg’s Paul bagel so Paul we’ve had about 15 minutes to kind of digest what we’ve heard although we

Are still waiting to hear from the Bank of Canada this of course in line with expectations this morning yeah hi Marcia great to be with you again uh as expected the Bank of Canada left its key lending rate at 5% it said there was a broad consensus within governing Council

Which is the key decision-making group within the Bank of Canada to hold the rate steady but the bank has made uh Marcia for the first time an explicit statement that the next move on rates is likely to be down now it didn’t signal any timing it certainly didn’t say the

Next time it makes a rate announcement there’ll be a rate cut but it said uh it said this governing council’s discussion about the future policy is shifting from whether Monet monetary policy is restrictive enough to how long to maintain the current restrictive stance so to in uh uh interpret that translate

That uh that’s saying we are no longer talking about whether not 5% is high enough to hold back inflation what we’re talking about now is when is the appropriate time to move rates down and that’s the most explicit statement we’ve had from the Bank of Canada on the

Future uh the on the on the likelihood of uh rate cuts the bank does say however it’s still concerned about inflation still concerned about what it calls underlying inflation the forces in the Canadian economy that push inflation up it does say that the the battle against inflation uh is being W uh

Gradually uh at one point it says uh that doesn’t mean we have ruled out further policy rate increases but it says what it does mean that is is that if the economy evolves broadly in line with our expectations I expect this is Governor Tiff Macklin speaking I expect

Future discussions will be about how long we maintain the rate at 5% to translate that that means uh when do we begin moving uh rates down uh below the 5% Mark speaking of expectations Paul we shouldn’t expect the Bank of Canada to commit to a time today um it sounds like

You’re telling us they’re saying a cut is is in the future but they’re not going to give us a specific month correct absolutely correct the mar it doesn’t want to do that uh what we have seen in bond markets is that bond yields have declined and that is uh largely the

Result of a forecast by all those investors in the bond market as to where inflation is going and therefore where uh central banks are going and we often hear that the banks uh often feel central banks that the Market’s getting ahead of itself and so uh one U one

Purpose I think of today’s uh statement from the Bank of Canada is to signal that uh the future direction of rates is likely down but don’t get overly enthusiastic about a rate cut coming very very soon for instance the fixed income Market has until recently been uh it had placed an overwhel ing

Probability on the likelihood of a quartero rate cut on April the 10th which is uh a day on which the Bank of Canada will make a rate announcement and the the bank clearly seems to be saying today although you’re right it’s not it’s not specifically mentioning days

But it clearly seems to be signaling today uh that’s that that is unlikely a cut that early is unlikely uh the B you know and it’s s it’s it’s it’s signaling that by saying the battle against inflation has has been successful thus far but it’s not over and it will be

Uneven we will see inflation reports where inflation jumps up uh periodically and we’re still concerned about underlying inflation we’re not taking rate increases completely off the table all of those things are intended to to cool down the enthusiasm over the timing of rate Cuts okay and Paul just a quick

Thought from you on the markets at this point uh we’ve got the TSX and the Dow seeing some gains I noticed that the dollar uh lost a little bit and he connection between the bank of rate the bank of Canada’s interest rate announcement and what we’re seeing

Happen on the TSX uh not so much on the TSX but definitely the Canadian dollar the Canadian dollar lost value immediately at 9:45 a.m. eastern time because uh the market is now judging that uh a rate cut is likely further into the future uh than it had earlier

Uh forecast the big thing driving markets today is Corporate earnings uh some tech earnings in particular have been positive and that’s got stock markets moving higher Paul thanks so much really appreciate it we’ll see you soon you bet

BNN Bloomberg’s Paul Bagnell discusses what the Bank of Canada’s forecast looks like in terms of lending rates in 2024.

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