Bank of Canada Governor Tiff Macklem, speaking before a House of Commons finance committee in Ottawa, indicated that the central bank is nearing a decision to cut interest rates, as key indicators of inflation show a significant downturn. Macklem highlighted that economic growth has slowed, supply surpluses have emerged, and the labor market has cooled from its previously overheated state—all contributing to a decrease in inflationary pressures.
During his address, Macklem expressed cautious optimism, stating, “We are seeing what we need to see and we just need to be confident that it will be sustained.” He noted the potential for an interest rate cut as soon as June 5, considering the positive movements in core inflation indicators that exclude volatile elements like food and energy prices.
This potential shift in monetary policy could bring relief to homeowners and prospective buyers who have faced high interest rates, the highest seen in 20 years. The Bank of Canada’s current policy rate stands at five percent, which has significantly restrained housing market demand. However, Macklem projects a resurgence in the housing market and a possible increase in home prices as the year progresses.
While the U.S. Federal Reserve has decided to maintain its interest rates, citing persistently high inflation, Macklem explained that Canada’s weaker economic performance relative to the U.S. allows for a different monetary policy approach. He also mentioned that any rate cuts could impact the Canadian dollar, potentially lowering its value compared to the U.S. dollar, which could affect cross-border travel and purchases but may benefit Canadian exporters by making their goods more competitively priced internationally.