Bank of Canada Governor Tiff Macklem takes part in a news conference after announcing an interest rate decision in Ottawa, Ontario, Canada March 6, 2024. REUTERS/Blair GableBlair Gable/Reuters

Jeremy Kronick is associate vice-president and director of the Centre on Financial and Monetary Policy at the C.D. Howe Institute, where Steve Ambler, a professor of economics at Université du Québec à Montréal, is the David Dodge Chair in Monetary Policy.

The latest data (from February) indicate that the battle against inflation is almost over. Despite the encouraging inflation data, the Bank of Canada again held its policy rate at 5 percent on Wednesday. What gives? The bank, like many other central banks, was slow off the mark to raise rates as inflation took off. We worry it runs the risk of falling behind the curve again.

First, let’s examine why the bank might be hesitating to cut – the housing market and fiscal policy. Then, let’s examine why, in our view, that’s not enough.

Year-over-year headline inflation dropped inside the bank’s 1-3 percent range in January, and continued to fall in February, sitting at 2.8 percent. Core inflation, which strips out more volatile prices, also fell over those same two months, with the bank’s preferred measures –........

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