Bank of Canada Expected to Hold Rates Steady Despite Cooling Inflation Due to High Shelter Costs

• Bank of Canada expected to keep interest rates unchanged this week at 5% despite inflation falling back into 1-3% target range • Analysts think bank will maintain cautious tone and avoid timeline for rate cuts until core inflation shows "clear downward momentum" • Inflation dropped to 2.9% in January, but shelter inflation remains high at 6.2% • Economy grew slightly in Q4, avoiding recession, giving bank "time to wait for inflation to come down" before cutting rates • Bank likely to start cutting rates by mid-year, but housing affordability and supply issues remain key challenge