At the same time, Macklem has stressed that the central bank does not want to cut interest rates prematurely and therefore will wait until there’s clearer evidence that inflation is headed back toward the bank’s 2% target soon.
“This would be exhibit A from the (central) bank’s library as to why we have to be cautious,” said BMO chief economist Douglas Porter.
The Bank of Canada has held its key interest rate steady at 5% since July, waiting for more evidence that inflation is getting closer to 2%.
Its last projection suggested inflation would reach that target in 2025, a forecast many economists share.
Porter says one source of uncertainty in these forecasts comes from energy prices, which typically have a significant effect on overall inflation.
“Oil prices can move mightily rapidly, and make a lot of inflation forecasts look pretty foolish,” he said.
Tuesday’s report will be the last inflation reading ahead of the Bank of Canada’s April interest rate announcement, which Porter called a “critical decision.”
When might interest rates come down?
Although the central bank is not expected to change its policy rate next month, many forecasters anticipate it will do so at the following decision meeting in June.
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