Those hoping for an upcoming drop in interest rates will be disappointed, because the Bank of Canada is considering only two possibilities: maintaining or raising the manager.

This is revealed in the minutes of the central bank leaders’ discussions which led to the maintenance of the key rate at 5% on September 6.

In deciding to pause the rise in interest rates, monetary authorities were concerned that this decision “would be misinterpreted as a sign that monetary tightening was over and that interest rate cuts would follow shortly term “.

Some economists have in fact interpreted this pause as the end of the increases and expressed the opinion that the next move by the Bank of Canada would be a rate cut, which could occur at the beginning of 2024.

This is not at all in the cards, indicates the summary of the discussions of the bank’s board of directors published on Wednesday.

On the contrary, the monetary authorities are “determined not to raise expectations in this direction, since maintaining or increasing the key rate were the only possibilities considered”.

In fact, Bank of Canada management finds the lack of progress on core inflation “very concerning.” This may mean that monetary policy is not tight enough, she believes, or, put another way, that further rate hikes are needed to bring the inflation target back to 2%.

Since deciding to maintain its key rate at 5%, the Bank of Canada has received the inflation picture for the month of August, which is even more worrying. The overall inflation rate rose more than expected, from 3.3% in July to 4%. Above all, measures of core inflation, stripped of the most volatile elements like gasoline, continue to increase, which greatly worries monetary authorities.

Encouraging signs have nevertheless appeared in the labor market, which is less tense, and in food prices, whose growth is slowing, observes the Bank.

The Canadian economy contracted by 0.2% in the second quarter, while the Bank of Canada had instead forecast growth of 1.5%. This decline is interpreted by central bank leaders as an effect of successive increases in interest rates. But it can also be explained by other factors, such as forest fires and public sector strikes, which helped reduce growth.

The fires that ravaged the country from coast to coast have hit the oil, mining and gas sector, and reduced economic growth by 0.5%, the central bank estimates. Likewise, strikes in the public sector would have cut growth by 0.25%.

Until its next decision on October 25, the Bank of Canada’s board of directors will particularly monitor wage growth, which is still incompatible with the return of inflation to the 2% target, and the better-than-expected performance of the American economy, which could have the effect of stimulating the Canadian economy.

At the end of these discussions that began on August 31, in which Governor Tiff Macklem and Deputy Governors Carolyn Rogers, Toni Gravelle, Sharon Kozicki, Nicolas Vincent and Rhys Mendes participated, it was decided on September 6 to maintain the key rate to 5%, while clearly highlighting the lack of progress on the inflation front and emphasizing the likelihood of further increases to come if necessary.