The Bank of Canada is keeping the door open to an interest rate cut in June even as it emphasized that it won鈥檛 be rushed into it if inflation shoots back up.

鈥淵es, it鈥檚 within the realm of possibilities,鈥� governor Tiff Macklem said in response to a question about the possibility of a rate cut at its June 5 announcement.

The Bank of Canada kept its key interest rate at five per cent Wednesday 鈥� marking the sixth consecutive hold 鈥� and said that it has begun to see the economic conditions it deems necessary for lower interest rates.

Economic data since January has increased the central bank鈥檚 confidence that inflation will continue to slow even as economic growth picks up, Macklem said.

But the central bank wants more certainty before pulling the trigger on rate cuts.

鈥淚 realize that what most Canadians want to know is, when we will lower our policy interest rate. What do we need to see to be convinced it鈥檚 time to cut?鈥� Macklem said.

鈥淭he short answer is, we are seeing what we need to see but we need to see it for longer to be confident that progress toward price stability will be sustained.鈥�

The Bank of Canada鈥檚 latest announcement suggests although the central bank is largely encouraged by the progress made so far on the inflation front, it plans to continue taking a cautious approach with its monetary policy decisions.

Economists reacting to Wednesday鈥檚 news continue to expect the central bank to begin lowering its policy rate around the middle of the year, with many leaning toward June. However, they acknowledge that will require the slowdown in underlying inflation to be maintained over the next couple of months.

Jeremy Kronick, an expert on monetary policy at the C.D. Howe Institute, says the economy has clearly bent to the will of higher interest rates and inflation has backed off meaningfully.

The slowdown in the Canadian economy became more clear in the latest jobs report, which showed the unemployment rate ticking up to 6.1 per cent. Business bankruptcies have also been on the rise and real GDP per capita has been on a steady decline.

Meanwhile, Canada鈥檚 inflation rate slowed to 2.8 per cent in February and measures of underlying price pressures have also eased.

鈥淎ll those things are good. I think they just want to see those trends continue,鈥� Kronick said of the central bank.

The central bank has been particularly focused on measures of core inflation, which gauge underlying price pressures by stripping out volatile price movements.

TD chief economist Beata Caranci says the Bank of Canada鈥檚 language about waiting to see more evidence is similar to what the U.S. Federal Reserve has been saying.

鈥淭here鈥檚 still a significant amount of central bank cautiousness, because there鈥檚 an element of 鈥榃e like what we see, but we鈥檙e not certain if it鈥檚 going to hold,鈥欌�� said Caranci.

U.S. inflation figures released Wednesday show the annual inflation rate ticked up to 3.5 per cent in March, which is spurring speculation that the Federal Reserve might keep interest rates higher for longer.

The U.S. economy has been exceptionally resilient amid high interest rates. Indeed, the Bank of Canada upgraded its economic forecast for the U.S. in its quarterly monetary policy report.

An upward revision of Canadian economic growth as well suggests the likelihood of a 鈥渟oft landing鈥� 鈥� whereby inflation slows without a significant economic downturn 鈥� has increased.

The central bank has slightly revised its forecast for inflation lower this year and continues to expect it to return to the two per cent target by the end of 2025.

Economic growth is expected to come in stronger than previously anticipated this year. The central bank is forecasting the economy to grow by 1.5 per cent this year and about two per cent in 2025 and 2026.