TORONTO (Reuters) - The Bank of Canada (BoC) kept its key rate unchanged at a near 23-year high of 5% on Wednesday and ruled out a cut until it sees more signs that a recent drop in inflation will be sustained.

In its quarterly Monetary Policy Report, the bank also hiked its growth forecast for 2024 on the back of strong immigration flows and increased household spending.

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COMMENTS

ANDREW GRANTHAM, SENIOR ECONOMIST, CIBC CAPITAL MARKETS

"Overall, the statement is in line with a central bank moving slowly towards lowering interest rates, and sustained downward momentum in core inflation within the next CPI print will be key in determining whether than process can start at the next meeting in June."

SIMON HARVEY, HEAD OF FX ANALYSIS FOR MONEX EUROPE AND MONEX CANADA

"Although the Bank went to extreme lengths to avoid locking itself into a June rate cut, through its characterization of the output gap and inflation, it has heavily implied that it will begin to ease policy rates consecutively from June onwards."

"If anything, our read on the Bank's updated forecasts and view of the economy suggests they should be cutting at today's meeting. However, having conducted multiple policy errors since the onset of the pandemic, the Bank has taken a more cautious approach as it seeks to ensure inflation has dissipated before easing policy."

"Set against a more inflationary US economy that shouldn't see the Fed cut before September, the BoC's dovish stance should let rate differentials to widen further moving forward, lifting USD-CAD up to 1.38 over the course of Q2."

ANDREW KELVIN, CHIEF CANADA STRATEGIST, TD SECURITIES

"To me this reads that you are taking another step towards cutting rates but the bank needs to see more evidence that it (inflation) will be sustained."

"They've kept all their options on the table here. I still think that July is the most likely meeting to see rate cuts but certainly June should be seen as a live meeting."

"Their upgrades to GDP growth were quite a bit stronger than I expected but given that they are looking at lower inflation by the end of the year relative to the January MPR it makes sense that they have a bit more of a dovish tone here than they had in previous months."

"I think what they are saying is the conditions are in place to justify rate cuts, they just need to make sure that they will persist."

KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CORPAY

"This is far more cautious than markets had anticipated. The bank is saying that they are confident that inflation is moving in the right direction but still not confident enough to begin cutting rates."

"Essentially what they're saying is that the economy could run hotter than they had previously anticipated and that is not sufficient grounds for beginning to ease immediately."

(Reporting by Rod Nickel, Fergal Smith; Editing by Denny Thomas)