The Bank of Canada (BoC) anticipates that there will be no additional interest rate hikes in the current cycle, with the benchmark rate expected to remain at 5.0% until April 2024, according to a survey conducted by the bank. At that point, a 25 basis point rate cut is predicted, leading to a projected drop in the policy rate to 4.0% by the end of 2024.
This forecast comes after the bank has increased its policy rate by 4.75 percentage points since March 2022. Despite these increases, the BoC has held rates steady in its last two decisions, including the one on Oct. 25, and warns of potential hikes in the future. The next decision is scheduled for Dec. 6.
The bank’s governor, Tiff Macklem, informed the Senate Committee on Banking on Nov. 1 that the current tightening cycle is unlikely to see more interest rate hikes. This information was corroborated by senior economists and strategists who participated in the third-quarter market survey.
The BoC has been tightening monetary policy in an effort to meet its two per cent inflation target. However, with annual inflation at 3.8% in September and Q3 GDP data indicating potential economic stagnation or decline, there is a significant downside risk to Canada’s economic growth status. The survey suggests a 48% probability of recession within the next six to twelve months due to this tighter monetary policy. Further insight into these deliberations will be provided with the release of the Dec. 6 rate decision.
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Source: Investing.com