Handicapping when the Bank of Canada will cut interest rates will be hard. Even Governor Tiff Macklem and his five deputies on the Governing Council don’t know. They have “different views” on how much additional evidence they would need to be assured that inflation has been beaten, and a “diversity of views” on the conditions that would let the central bank lower borrowing costs, according to the summary of deliberations that led to their latest rate decision. 

But some economists think they know when the pivot is coming, and they aren’t shy about saying so. 

“July it is and maybe even later,” Lakehead University economics professor Livio Di Matteo declared on LinkedIn, where he had posted The Globe and Mail’s take on the summary of deliberations. 

Tyler Meredith, a former adviser to Finance Minister Chrystia Freeland, was having none of that. “This is a bit absurd,” Meredith commented. Macklem “has basically given forward guidance for June,” he continued. “To tack now to July, in the face of an even softer retail sales report, would send a bad signal about his communications abilities.”

The exchange brought to mind what the great Canadian economist Harold Innis once said of his tribe: “Any exposition by any economist which explains the problems and their solutions with perfect clarity is certainly wrong.” 

Macklem likely wishes the timing of an interest rate cut was so certain, and he would be surprised to learn that he had given forward guidance of any kind. 

At the press conference that followed the April 10 policy announcement, a reporter asked Macklem directly if a cut at the next decision date on June 5 was “in the realm of possibilities.” The governor smiled, paused, and then said, “Yes, it’s within the realm of possibilities.” 

That smile, based on my experience, was more a reaction to an attempt by a reporter to force him out of the world of abstraction, where central bankers are more comfortable; it wasn’t a wink at what’s to come. A cut in June is in the realm of possibility, and so is another pause. “I was asked a very direct question,” Macklem said during testimony at the Senate banking committee on Wednesday. “I gave a very direct answer. I try to give as direct answers as possible.” 

Some central bankers prefer abstraction because of the consequences of their words being misinterpreted—or just as often, overinterpreted. Macklem was responding to a question from Senator Elizabeth Marshall, a Conservative from Newfoundland and Labrador, who suggested the governor’s answer to the reporter’s question had given people “unrealistic expectations,” as they are “holding onto that [comment] now, they think their mortgage rates are going down.” 

Some tend to assume central bankers are always speaking in code. For example, Scotiabank economist Derek Holt this week seized on something Macklem said in his opening Senate statement, which he repeated verbatim ahead of testimony at the House finance committee the next day. 

Macklem reiterated that “in the months ahead, we will be closely watching the evolution of core inflation.” Holt, defending his prediction that sticky inflation will keep the Bank of Canada from lowering interest rates before the fall, told his clients in a note that “months (i.e. plural)” signalled that a cut at the next meeting was off the table, since June is now only one month, singular, away. 

A knack for reading tea leaves is helpful when covering the Federal Reserve. It tends to adjust its messaging very carefully, given that any shift in U.S. monetary policy will ripple through global markets of all kinds. The Fed’s policy statements also change very little from meeting to meeting, so things like verb tenses and pluralization matter. The decision this week to leave the U.S. benchmark rate unchanged, while also stating that rates would be staying higher for longer, caused few waves because Fed Chair Jerome Powell and other officials had telegraphed the outcome. 

The Bank of Canada doesn’t communicate that way. Each policy statement begins as a blank page, not a template. Officials have an abstract idea of a trajectory for interest rates; they need one to guide their thinking on what to do to hit their inflation target. But they can’t commit to it until they see how things play out in the real world. 

“We have our decisions eight times a year, and we want to take the decision when we get to the decision and we have the benefit of all the latest information, so we can take the best decision possible,” Macklem said. “What that means is: we’re not going to put things on a calendar.”

What the Bank of Canada has done is publicize its checklist for deciding when to cut interest rates. It’s watching core inflation; the “balance of supply and demand” in the economy; corporate price behaviour; inflation expectations; and wage growth. All of those things have been moving in the right direction. Wages might be the most troublesome, as they are increasing much faster than productivity, implying employers will have to raise prices to cover the higher cost of staffing. However, the summary of deliberations said members “acknowledged” that wages are a lagging indicator, and increases “should ease gradually in the coming quarters, given cooling labour conditions.” 

The jobless rate rose to 6.1 per cent in March, the highest non-pandemic reading since 2017. Statistics Canada will release April hiring data on Friday, and new inflation numbers on May 21. Circle those dates on your calendar, and decide for yourself when interest rates will fall. 

Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.