The Bank of Canada is holding its key interest rate steady at five per cent today, arguing it is still too soon to start lowering rates.

The central bank says inflation has continued to ease and the economy is weakening but underlying price pressures are still persistently high.

Canada’s inflation rate dropped to 2.9 per cent in January, falling within the Bank of Canada’s one-to-three per cent target range.

According to his prepared remarks, governor Tiff Macklem says the central bank needs to give higher rates more time to do their work.

Economists are widely expecting the central bank to begin lowering its policy rate around the middle of the year.

The Canadian economy has taken a hit from higher interest rates as consumers pull back their spending and business investment falls.