The Bank of Canada’s Decision to Maintain Interest Rates in April

The Bank of Canada is facing internal divisions over the timing of a potential cut to its key overnight interest rate, with some members of the governing council expressing concerns that progress on taming inflation could be at risk.

According to a summary of deliberations for the April 10 rate decision, some members of the central bank emphasized that the economy was performing well, reducing the risk of overly restrictive monetary policy slowing down economic growth. However, others argued that there were still risks associated with keeping monetary policy too tight, despite significant progress in taming inflation.

Ultimately, the central bankers decided to hold the rate at five per cent due to persistently high inflation and lingering upside risks to the economic outlook. They acknowledged a “diversity of views” on when conditions would warrant a rate cut but agreed that any easing of monetary policy would likely be gradual.

The central bankers also discussed potential risks to economic growth and inflation, including the housing market and immigration. They recognized the risk of housing market activity accelerating and further boosting shelter prices, but noted that their focus on measures like CPI-trim allowed them to effectively monitor inflation trends.

Overall, the central bank remains vigilant about the outlook for inflation and economic growth, with a commitment to updating forecasts regularly to account for uncertainties, such as changes in immigration policies.