In a move that could greatly impact the economy of Canada’s economy, Dawn Desjardins, Deloitte Canada’s Chief Economist, has predicted that the Bank of Canada will begin a series of interest rate cuts starting from the second quarter of 2024. The apex bank is likely to implement three 25-basis-point reductions, moving the policy rate from its current position of five percent to 4.25 percent by 2024’s close.
The predicted reductions are predicated on the projection that inflation will reach the central bank’s two percent target. This will enable the introduction of interest rate relief. Canada’s current inflation rate is marginally above the target, standing at 3.1 percent. It however exhibits a declining trend and suggests that the central bank’s objective may soon be realized.
The economy of Canada is presently battling a mild recession characterized by a contraction in the real gross domestic product (GDP). Desjardins expects a slow start for 2024, with an anticipated gradual improvement in economic performance as the year progresses. Despite the recession, job losses are not in the forecast. The unemployment rate is predicted to increase slightly above six percent, attributed majorly to population growth, rather than extensive layoffs.
The Bank of Canada is expected to be careful to avoid rekindling inflationary pressures before a sustained two percent inflation rate is achieved. This approach coupled with the expected reductions in interest rates, could play a major role in stabilizing and rejuvenating Canada’s economy in 2024.
