Economists believe Canadians will need to wait a few more months before they see relief from high interest rates – and the exact timing of cuts will depend on economic data.

On Wednesday morning, the Bank of Canada announced it would hold rates at five per cent for the fourth consecutive meeting, a move that fell in line with economists’ projections.

In a new development, the central bank said its rate-setting discussions are “shifting from whether monetary policy is restrictive enough to how long to maintain the current restrictive stance” – the strongest indication yet that rate hikes are in the rear-view mirror.

Despite those signals, Governor Tiff Macklem highlighted that further hikes can’t be ruled out.

“The risk of a rate hike is not zero … We may need to raise rates further,” he told reporters in a Wednesday press conference.

“More confident doesn’t mean there are no scenarios where we need to raise rates further.”

Dawn Desjardins, chief economist with Deloitte Canada, said the decision to keep rates as is shows the bank is remaining “cautious” and “patient” in its goal of taming inflation.

“They remain cautious, they continue to say (inflation) has to evolve the way we think it’s going to evolve, which is very fair,” Desjardins told BNN Bloomberg in a television interview following the announcement.

“When we think about the inflation outlook, the bank continues to expect it’s going to hit two per cent, but that’s going to take some time and that’s the waiting game, the patience game.”

When to expect cuts?

Desjardins is targeting the spring for when Canadians might see the first cut.

“We have the first cut coming in the second quarter. Now, April or June is of course the big question, and it really will depend on what we see in terms of those inflation numbers,” she said.

“The bank is not wanting to stoke inflation pressures again the way we saw the housing market take off recently.”

Ed Devlin, founder of Devlin Capital and senior fellow at the C.D. Howe Institute, said he believes cuts will come in June, with four cuts of 25 basis points expected for 2024.

“The market’s priced in 100 (basis points) and I don’t have a big disagreement with that, we’ll see how the data evolves,” he said.

Possibility of surprises

David Wolf, portfolio manager at Fidelity Investments and a former Bank of Canada advisor, was not as convinced in the June timeline, given the bank paused rates in June last year and then was forced to issue further hikes once inflation climbed again.

“I don’t think they’ll raise rates again, but we can’t be certain of that,” he said.

Deputy Bank of Canada Governor Carolyn Rogers was also asked about the possibility of cutting too soon on Wednesday.

“We know you and Canadians would like us to give you a very precise single measurement that a target if we hit this, we’ll have to start talking about rate cuts … we just can’t do that,” she told reporters.

“We see a hike to the rate as being a response to something we haven’t anticipated, that knocks us off our base case. Right now we need to stay the course.”

Wolf said Canadians could see only a slight drop in rates in 2024 in the event of a soft landing, but could also see cuts of upwards of 300 basis points by the end of the year if the country experiences a deep recession.

Avery Shenfeld, chief economist of CIBC Capital Markets, said Wednesday’s rate hold and Macklem’s rhetoric were consistent with his expectations.

“The governor noted that the meeting has shifted from a discussion of whether rates are high enough to one about how long they need to keep rates at five (per cent),” he said.

“That’s a dovish tilt, but is still consistent with our call for a first rate cut in June, with as much as 150 bps of cuts on tap this year if, as we expect, we’ll need that to get the economy moving again after its current stall.”

Geoff Phipps, portfolio manager and trading strategist at Picton Mahoney Asset Management said he expects cuts of less than 100 basis points for the year.

“The market is implying just over 90 basis points of 2024 rate cuts by the end of the year, down from about 130 basis points in early January,” he said in a statement.

Brooke Thackray, research analyst at Horizons ETFs, believes next month’s gross domestic product data will go a long way toward projecting future cuts.

“If the (fourth quarter) GDP report shows a second contraction in a row, this would put Canada into a technical recession and would put pressure on the Bank of Canada to ‘hurry up and cut,’” he wrote in a statement.

Fourth quarter GDP data is scheduled for release on Feb. 29.