Analysts expressed disappointment with the Bank of Canada’s decision to hold its key overnight interest rate at 5% on Wednesday.

The hold was widely expected but analysts could not hide their frustration with the central bank’s wait-and-see approach on introducing rate cuts.

“While the BoC isn’t ready to adjust course just yet, we think that the time for rate cuts is quickly approaching,” wrote James Orlando, a Toronto Dominion Bank senior economist, in a research note that he provided to Connect.

The BoC’s fifth straight rate hold followed 10 consecutive hikes between 2022 and first-half 2023 in a bid to curb inflation, which stands at 2.9%. The level is almost a full percentage point above the BoC’s 2% target.

“We’ve come a long way in our fight against high inflation,” BoC Governor Tiff Macklem said in a speech after the central bank announced its decision. “Monetary policy is working — inflation is coming down. But it’s too early to loosen the restrictive policy that has gotten us this far.”

Analysts have cited increased shelter expenses, namely high mortgage costs tied to interest-rate hikes, as a key contributor to inflation. Although Canada has avoided a recession, consumers are still feeling the pain of higher interest rates, noted Orlando.

The BoC has softened its stance on rate hikes in recent months. But the central bank will not reduce rates as quickly as it raised them, Macklem told reporters.

“The path back to our 2% target will be slow, and progress is likely to be uneven,” he said.

Marie-France Benoit, Avison Young’s director of Canadian market intelligence, said the BoC has left itself room to manoeuvre as a number of inflationary factors, including U.S. economic growth, remain on the radar. The BoC is expected to take a closer look at the commercial real estate sector in April, she added.

That means the industry must keep waiting until June or July for the long-awaited first policy rate cut.

“Investors are ready, as they have already positioned themselves for the expected upturn in investment activity that lower financing costs could bring,” said Benoit in a statement that Avison Young provided to Connect.

“But the timing for deployment remains unclear.”

The BoC’s dovish shift has lowered bond yields, providing relief for commercial real estate lenders, and industrial and anchored-retail mortgage spreads are tightening,” Luke Simurda, Marcus & Millichap’s head of Canadian research, wrote in a note posted on LinkedIn.

As a result investment activity has picked up.

“However, it is important to note that borrowing costs remain volatile and in restrictive territory, keeping many potential buyers on the sidelines,” wrote Simurda.

Pictured: Bank of Canada Governor Tiff Macklem