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BOC Sees Downward Inflation Momentum, Needs Evidence It Will Be Sustained

BOC
  • BOC holds the policy rate at 5% as officials wait to see whether recent progress in inflation will be sustained. 
  • "What do we need to see to be convinced it’s time to cut? The short answer is we are seeing what we need to see, but we need to see it for longer to be confident that progress toward price stability will be sustained."
  • The Bank revised down the 2024 inflation forecast from 2.8% to 2.6%; the 2% targeted is expected to reached in 2025.
  • "The data since January have increased our confidence that inflation will continue to come down gradually even as economic activity strengthens."
  • The 2024 growth forecast was revised to 1.5% from 0.8%, mainly due to rapid population growth, while the output gap for H1 2024 is estimated to be between -0.5 and -1.5%.
  • "We don’t want to leave monetary policy this restrictive longer than we need to. But if we lower our policy interest rate too early or cut too fast, we could jeopardize the progress we’ve made bringing inflation down."
  • The economy is in excess supply as labour markets ease and there are some signs of slowdown in wage growth. Corporate pricing behaviour is also normalizing as capacity constraints lessen. 
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