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Bank of Canada preview: A dovish tone with rate cuts on horizon

April 8, 2024

Authored by RSM Canada LLP

Curtis Carpino, CPA shared this article

REAL ECONOMY BLOG | April 08, 2024

The Bank of Canada will almost certainly leave its policy rate unchanged when it meets this week, but the tone of its statement will shift to dovish as bank officials recognize easing inflation, the slowing labour market and stagnant growth.

We expect that the central bank’s first rate cut will occur in June and that there will be a total of four this year, each one of 25 basis points. Such reductions would bring the policy rate to 4 per cent.

Waiting until June, though, risks a repeat of 2022, when the Bank of Canada waited too long to change its policy. Two years ago, the central bank needed to raise rates; this time, it needs to cut rates. Waiting too long could delay an economic recovery, which could put Canada behind other countries in the growth curve.

Canada CPI

In its statement, the Bank of Canada most likely reiterate the desire to observe a sustained moderation in inflation before cutting, a reflection of the central bank’s commitment to restoring price stability.  Bank officials want this message to hit home with businesses and consumers to stomp out any risks of reigniting inflation.

At the same time, though, we expect that the statement will acknowledge the remarkable strides the economy has made toward achieving price stability and that bank officials intend to address the economic slowdown. To this end, the central bank will leave open the possibility of easing rates in the near future.

But in our view, there is no reason to wait.

Inflation excluding mortgage rates, inflation excluding shelter, and the Bank of Canada’s core inflation measure—the consumer price index excluding the eight most volatile components—are all back on target. Even headline inflation has fallen to within the preferred range.

The takeaway

At this week’s meeting, the Bank of Canada’s tone is likely to be dovish given easing inflation, stagnant growth and slow hiring. The central bank’s statement will heavily signal rate cuts in the near future, which will be a significant departure from past statements that focused on caution and patience.

The Bank of Canada appears poised to transition toward a more accommodative monetary policy to support economic recovery. But it needs to act soon.

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This article was written by Tu Nguyen and originally appeared on 2024-04-08 RSM Canada, and is available online at

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