By Paul Vieira


OTTAWA--Senior Bank of Canada officials believed they would be in a position to cut interest rates this year, although they disagreed on when inflation would slow to a point to trigger such a move, according to a summary of central bank deliberations ahead of its March 6 policy decision.

The Bank of Canada on March 6 kept its policy rate unchanged at 5%, saying it remained premature to consider rate cuts despite encouraging signs on inflation and wage growth. Data this week indicated inflation in February surprisingly decelerated, to 2.8%, from 2.9% in the prior month. Gauges measuring core inflation, which strips out volatile items like food and energy, also slowed to their lowest levels in nearly three years.

The February inflation data ramped up predictions from economists and traders that the central bank is on pace for a rate cut beginning as early as June. The central bank sets interest rates to maintain and achieve 2% inflation.

The minutes cover the deliberations of the six-member governing council, led by Gov. Tiff Macklem, that began March 1. They indicate senior officials believed recent data pointed to inflation remaining around 3% in the coming months.

"Recent inflation data suggested monetary policy is working largely as expected," the minutes said. "[But] members reiterated their view that it was still too early to consider lowering the policy interest rate."

The half-dozen senior officials said that should the economy evolve as forecast, "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. Members agreed they need to see further and sustained easing in underlying inflation."

In its quarterly forecast issued in January, the Bank of Canada anticipated 0.8% growth for 2024, with output to be weak in the first half of the year.

Among the upside risks to inflation, the minutes said, was the housing market. Officials said recent strength in existing-home sales "could translate into a pickup in house prices and stoke shelter price inflation." Also this week, data indicate existing-home sales declined in February after two strong back-to-back monthly results. Economists at Bank of Nova Scotia note that despite the drop in February, the level of sales was still higher than in December.


Write to Paul Vieira at paul.vieira@wsj.com


(END) Dow Jones Newswires

03-20-24 1345ET