Rate cuts could be in the cards for 2024, but BoC sees housing market as a risk

The Bank of Canada's governing council says the conditions for interest rate cuts should materialize this year, but the housing market is a risk to the inflation outlook.

The Bank of Canada’s governing council seems to be growing in confidence that the central bank will be able to lower its benchmark interest rate sometime this year, but newly released documents show there’s concern among monetary policymakers about risks to their outlook.

The Bank of Canada on Wednesday released a copy of the deliberations from its March 6 interest rate decision, when it held the policy rate steady at 5.0 per cent for the fifth time in a row.

Officials at the Bank of Canada have been mum about a timeline on when the central bank can start to lower the cost of borrowing, but governor Tiff Macklem has acknowledged that rates probably don’t need to move higher amid signs the economy is slowing and inflation is coming back under control.

In debating its March 6 decision, the governing council agreed that if the economy continues to evolve “in line with the Bank’s projection, the conditions for rate cuts should materialize over the course of this year.”

But the deliberations also cite a “diversity of views” among the council about when it would be clear there is enough evidence for rate cuts to move ahead, and how to weigh the risks in the central bank’s outlook.

Among the biggest risks highlighted in the Bank of Canada’s deliberations is the possibility of a resurgent housing market.

“While house prices continued to fall in January, recent strength in resales could translate into a pickup in house prices and stoke shelter price inflation,” the minutes read.

Shelter price inflation remains the biggest fuel in overall inflation, which cooled further to 2.8 per cent year-over-year in February. Shelter prices accelerated to 6.5 per cent annual growth last month, up from 6.2 per cent in January, thanks to rising rents and mortgage costs.