April 24, 2024, 01:43 PM

Some Diversity of Views Among Bank of Canada Governing Council Members Around Timing of Rate Cuts

Bank of Canada on Wednesday published an account of the deliberations of the Bank of Canada's Governing Council leading to the monetary policy decision on March 6.

Perhaps of most interest to market watchers, the account said: "There was also consensus about the conditions Governing Council was looking for to lower the policy rate. Members agreed that if the economy evolves in line with the Bank's projection, the conditions for rate cuts should materialize over the course of this year. However, there was some diversity of views among Governing Council members about when there would likely be enough evidence that these conditions were in place, and how to weight the risks to the outlook."

The account noted members agreed they need to see "further and sustained easing in underlying inflation". They were to closely monitor the evolution of core inflation and remain focused on several key indicators, including: the balance of supply and demand in the economy; corporate pricing behavior; inflation expectations; and wage growth relative to productivity.

Finally, Governing Council members noted that market pressures on the overnight rate that were seen in January had mostly eased. The Bank had not conducted overnight repo operations to reinforce the target for the overnight rate since late January. Members concluded that the pressures seen in January were not at their root caused by quantitative tightening, and therefore did not indicate a need to change the Bank's approach. Governing Council agreed to continue its policy of normalizing the balance sheet by allowing maturing bonds to roll off.

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