BoC’s Summary of Deliberations: Expectations for rate cuts later in 2023 are not the most likely scenario

“Governing Council noted that while global economic growth remained subdued, it was again coming in stronger than expected, particularly in the euro area and the United States.”

“Governing Council assessed recent data and developments in Canada and judged them to be evolving broadly in line with their January projection. Headline inflation was coming down, and signs of a rebalancing of supply and demand were becoming evident. But Governing Council acknowledged that the labour market was still tight and the slowing in growth would likely come a little later.”

“Members of Governing Council revisited their concern that the current pace of wage growth, if sustained, would not be consistent with getting inflation back to 2% without a substantial increase in productivity (which has been declining in recent quarters).”

“Governing Council agreed that, overall, consumer spending is anticipated to be subdued in the second half of 2023 and into 2024 as the effects of the tightening in monetary policy work their way through the economy.”

“Governing Council was more confident that inflation in Canada would continue to fall in the coming months to around 3%, the second stage of disinflation all the way back to 2% could prove more difficult.”

“Members agreed that while a risk of a sharper slowdown remains, based on their current outlook, cutting rates later this year did not seem to be the most likely scenario.”

“The discussion around increasing the interest rate further focused on whether monetary policy was restrictive enough and whether it was best to raise the policy rate now or wait for more evidence.”