Bank of Canada Governor Tiff Macklem told lawmakers on Thursday that the central bank is nearing a rate cut as inflation shows signs of declining and staying low.

Macklem said during his appearance before the House of Commons finance committee: "We are seeing renewed downward momentum in core inflation. The message to Canadians is: we are getting close, we are seeing what we need to see, and we just need to be confident that it will continue."

Macklem stated that economic growth has stalled, there is a surplus of goods, wage increases have stabilized, and the labor market has slowed "from very hot levels," which has helped to reduce prices.

He added, "All of our key indicators for inflation have moved in the right direction," pointing to data that excludes more volatile price movements, such as food and energy prices.

The next opportunity for the central bank to cut interest rates is June 5.

Macklem's optimistic tone may be good news for homeowners and potential buyers who have had to buy or refinance a home at interest rates at their highest in 20 years.

He said the current bank rate of five percent was "constraining" demand for homes.

Macklem confirmed that the Bank of Canada now expects "a strong rebound in housing this year" with "some increase in home prices."

In acknowledging that rising interest rates have been tough on Canadians and some sectors of the economy, such as real estate, Macklem said the bank "does not want to keep monetary policy constrained any longer than we have to."

Macklem's relatively rosy outlook on interest rates differs somewhat from that of Jerome Powell, the Chair of the U.S. Federal Reserve, which sets interest rates in that country.

The Federal Reserve kept interest rates unchanged on Wednesday.

Powell said, "Inflation is still too high." "Making further progress on eliminating it is not guaranteed, and the path forward is uncertain."

Concerns about the Canadian dollar

Macklem said there is a reason inflation is lower here than it is in the U.S., which is that the Canadian economy has been weaker than the economy south of the border.

He continued, "We have our own currency - we can manage our own monetary policy," adding that a decision to lower interest rates while the U.S. stands pat could have an "impact on the Canadian dollar."

If we move less than the Federal Reserve, it will lead to a depreciation of the Canadian dollar."

This could be a problem for vacationers and frequent cross-border travelers, but a weaker Canadian dollar can also be a boon for the Canadian economy, as our exports become cheaper.