Bank of Canada will cut three times next year to bring rate to 4.25%, Deloitte predicts
The Bank of Canada will likely start cutting interest rates in the second quarter of 2024, predicts the chief economist at Deloitte Canada.
Deloitte is forecasting three 25-basis-point cuts from the central bank, which would reduce its overnight policy rate from five per cent to 4.25 by the end of 2024.
“We’re going to have two per cent [inflation] in the Bank of Canada’s sights,” Dawn Desjardins said in a recent interview with the Financial Post’s Larysa Harapyn. “That will open the door for them to start to give some interest rate relief.”
Canada’s inflation rate is still a ways away from the Bank of Canada’s two per cent target, but continues to come down. The consumer price index slowed to 3.1 per cent year over year in October from 3.8 per cent the month before.
Meanwhile, the economy remains weak as we exit 2023. Real gross domestic product shrank by 0.3 per cent in the third quarter and 1.1 per cent on a yearly basis.
Desjardins is anticipating these trends to continue in the new year. The Bank of Canada will then be in position to lower policy rates.
“A lot of things are sort of in train,” she said. “We see that the inflation pressures have eased considerably.”
She added that consumers and businesses are expecting the central bank to be successful in getting inflation back to two per cent.
“We’re going to get through this hump,” Desjardins said. “This provides some support for households.”
Desjardins added that Canada is currently experiencing a mild recession. She believes that 2024 will have a slow start but the economy’s pace should pick up a through the course of the year.
The unemployment rate, now at 5.7 per cent, is set to rise above six per cent from Canada’s rapid growth in population, but there won’t be
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