Posthaste: Downturn expected to get worse before Bank of Canada rate cuts kick in
Bank of Canada interest rates are on their way down, but don’t get your hopes up about an economic rebound anytime soon.
In its latest outlook for the provinces, Fédération des caisses Desjardins du Québec predicts things will get worse before they get better.
“We remain convinced that growth will soften in most provinces during the quarters ahead, and a fuller rebound will only come closer to 2025 once more cuts have been made,” said economists Marc Desormeaux and Hélène Begin.
Changes to interest rates, whether they be cuts or hikes, normally take between 18 months to two years to work their way through the economy.
The Bank of Canada has now cut 50 basis points, and is expected to cut at the next four meetings, bringing the benchmark interest rate to 3.5 per cent by January.
“Although expectations of additional interest rate reductions underpin our forecast of stronger economic growth in 2025, the recovery is still in its early days,” said the economists.
Desjardins’ forecast has the nation’s growth in real gross domestic product hitting bottom at 1 per cent by the end of 2024.
It will be even lower for the provinces most sensitive to interest rates.
The economists predict British Columbia’s real GDP will finish 2024 at 0.6 per cent and Ontario at 0.9 per cent.
Even with the rate decline, many homeowners will see their mortgage payments go up when they renew and savings rates in these two provinces are already climbing as residents brace for “future rate shocks.”
The oil-producing provinces are expected to fare much better, with Newfoundland and Labrador leading the pack. Desjardins sees growth in the eastern province topping the charts at 2.2 per cent, ahead of Alberta’s 2 per cent gain.
Meanwhile, fears that the
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