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When will interest rates start to fall?

While market optimism towards a possible April rate cut has recently surged, the Bank’s latest statement did little to shift BMO’s view that downward movement won’t take place until the summer – with a cut pencilled in for June at the earliest.

Overall, the central bank struck the right tone on the economic outlook in its January announcement, according to Guatieri, walking a careful tightrope of adopting a more dovish approach while not tipping consumer and market optimism into overdrive.

The economy remains sufficiently weak to hold rates where they are – but inflation is also proving resilient enough to keep a cutting timeline off the table for now, he said.

“There’s no need to raise interest rates further, barring an upside surprise on inflation, but in the same light inflation has been stubborn and we’re still seeing stickiness on the services side, shelter costs and wage growth,” he said.

“So it would be premature to rush into easing policy at this point and running the risk of inflation reaccelerating. I think the Bank of Canada is cutting the right balance here and saying, ‘Yeah, the next move on rates is most likely a reduction. But there’s no reason for us to rush into cutting rates.’”

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