Exhausted Canadian families, struggling with high prices and rising interest rates soaring to the sky for nearly two years, will have to wait a little longer for relief on their borrowing costs.

Meanwhile, the Bank of Canada left the key overnight lending rate unchanged at five percent on Wednesday, pointing to persistent core inflation and concerns that it might declare victory too early and have to backtrack.

But the bank said it shifted from whether interest rates were high enough to how long they should remain high.

Bank Governor Tiff Macklem said at a press conference in Ottawa that if the economy broadly evolves in line with the forecasts published today, he expects future discussions to be about the duration we will keep the interest rate at five percent.

Macklem told reporters it is important not to give Canadians a false sense of precision.

If you read the bank's forecasts, you can probably piece it together yourself. The bank expects inflation to slow to 2.5 percent by the end of the year. It thinks economic growth will remain near zero percent but will not slip into a recession.

Therefore, most economists expect the central bank to start cutting interest rates by the summer.

For his part, Benjamin Reitzes, Managing Director at BMO Capital Markets, wrote that BMO's call to start interest rate cuts in June seems perfectly reasonable at this time.

And Nathan Janzen, Senior Assistant Economist at the Royal Bank of Canada, wrote to clients: We expect that slowing price growth alongside the weak economic backdrop will push the [Bank of Canada] to begin gradually cutting the interest rate by mid-year.

Trading in investments known as swaps—a type of investment where traders can essentially bet on where they think interest rates will be—means there is a 97 percent chance of a rate cut by the Bank of Canada policy meeting on July 24.

Inflation brought higher interest rates

Back in the early days of the COVID-19 pandemic, Macklem cut interest rates and told Canadians they would remain low for a long time.

Macklem said in July that if you have a mortgage or are thinking about making a big purchase, or if you are a business owner thinking about investing, you can be confident that interest rates will be low for a long time. 2020.

Within months, inflation began to rise. Even then, many dismissed the price increases as temporary.