MNI: BOC Minutes Showed Debate Over Need For Further Rate Cuts

Bank of Canada minutes published Tuesday from the June 4 decision showed officials discussed cutting rates if the trade war brings further economic weakness, while persistent inflation would make easing more difficult but not impossible.

"There was some diversity of views on the most likely path ahead," said the summary of deliberations. Officials debated cutting the 2.75% rate and then opted to hold for a second meeting, after seven prior cuts in a row. 

"The weaker the economy and the more downward pressure on inflation, the more there would be a need to lower the policy interest rate further. However, if the recent firmness in underlying inflation were to persist, it would be more difficult to cut the policy rate."

"Overall, members agreed there could be a need for a further reduction in the policy interest rate if the effects of U.S. tariffs and uncertainty continued to spread through the economy and cost pressures on inflation were contained," the report said, echoing language from the decision itself.

A majority of economists surveyed by MNI since the last decision see a cut in July and another one later this year even with core CPI faster than 3%. Many economists predict a technical recession has begun this quarter and point to unemployment that's reached the highest since 2016 excluding the pandemic. (See: MNI INTERVIEW: Mild Stimulus Cures Canada Recession- Ex-Clerk)