09:25 AM EDT, 09/05/2024 (MT Newswires) -- The Bank of Canada (BoC) is clearly not reluctant to cut rates, but

might still be held back slightly by the idea that shelter

inflation is elevated -- it shouldn't be, said Bank of Montreal (BMO).

Governor Tiff Macklem's opening policy meeting remarks on Wednesday said that "overall weakness in the economy continues to pull inflation down. But price pressures in shelter and some other services are holding inflation up."

According to BMO, three reasons why Canada's central bank should

probably let it go:

-- First, the components of shelter inflation that are still sticky

(rent and mortgage interest costs) are notoriously backward-looking and take time to adjust to current conditions.

-- Second, those conditions are easing on the ground. Mortgage rates are, of course, falling, while market rent has stabilized even before population growth has cooled and with more completions in the pipeline.

-- Third, the resale market hasn't responded to rate cuts in any concerning way. It hasn't responded at all, yet.

Inflation excluding shelter has been running below 2% in each of the first seven months of 2024, pointed out the bank.