The Bank of Canada expects it will be able to begin cutting interest rates sometime this year, but officials are split on timing.

That's according to the central bank's summary of deliberations detailing the discussions governing council members had in the lead-up to the March 6 interest rate announcement.

The summary says governing council members agreed that if the economy and inflation evolve in line with the Bank of Canada's projections, the central bank will be able to begin cutting interest rates sometime this year.

And while members agreed on the conditions the Bank of Canada needs to start lowering its policy rate — they want to see further and sustained easing in the bundle of indicators they call "underlying inflation" — they had varying views on when those conditions will be met. 

"There was some diversity of views among governing council members about when there would likely be enough evidence that these conditions were in place, and how to weight the risks to the outlook," the summary said. 

The Bank of Canada opted to continue holding its interest rate at five per cent earlier this month and brushed off questions on the timing of rate cuts.

Governor Tiff Macklem said the central bank did not want to move too quickly, only to have to reverse course later. 

On Wednesday, the U.S. Federal Reserve also announced it is holding its key interest rate unchanged for a fifth consecutive meeting. 

Officials at the central bank signalled that they still expect to cut their key interest rate three times in 2024 despite signs that inflation remained surprisingly high at the start of the year. Yet they foresee fewer rate cuts in 2025, and they slightly raised their inflation forecasts.

In contrast, the Bank of Canada is tighter-lipped about its future policy decisions. But Macklem has suggested the central bank will not cut interest rates at the pace it raised them. 

In Canada, recent data shows the annual inflation rate came in lower than expected for a second consecutive month, reaching 2.8 per cent in February.

The latest inflation figures solidified economists' expectations that the Bank of Canada will begin cutting interest rates around the middle of the year. 

However, the summary suggests the central bank is quite concerned that inflation risks trending higher than expected, particularly as shelter costs continue to skyrocket. 

"If the housing sector rebounds in the spring, shelter price inflation could be pushed up, delaying the return of CPI inflation to the two per cent target. If inflation proves more persistent than expected, monetary policy would likely need to remain restrictive for longer," the summary said. 

Shelter costs in February were 6.5 per cent higher than they were a year ago. Mortgage interest costs and rent were the two largest contributors to inflation that month.

The Bank of Canada's next interest rate announcement is scheduled for April 10. 

With files from The Associated Press

This report by The Canadian Press was first published March 20, 2024.