Published: November 6, 2023 at 11:22 am ET
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OTTAWA — As per a survey of financial market participants, the Bank of Canada is considering reducing interest rates starting from April due to the expectation that inflation will remain within the range of 1% to 3% until the end of 2024.
On Monday, the Bank of Canada revealed its quarterly results, stirring reactions from roughly 30 participants in the financial market…
by Paul Vieira
OTTAWA — According to a survey of financial market participants, the Bank of Canada may begin reducing interest rates as of April, considering the anticipation that inflation will remain in the range of 1% to 3% until the end of 2024.
On Monday, the Bank of Canada published the quarterly results of approximately 30 financial market participants’ responses to inquiries related to the economic outlook and monetary policy.
The respondents of the survey were questioned regarding their forecast for the Bank of Canada policy rate. The average of 28 responses indicated that the first cut would occur in April, by a quarter-point to 4.75%. Out of the 27 responses, the average Bank of Canada policy rate as of December 2024 would be 4%.
Last month, the Bank of Canada opted to keep its benchmark rate steady at 5%, asserting that tight financial conditions were hindering consumption and the economy was creating surplus capacity. Roughly two-thirds of the survey respondents expressed the belief that the economy has a slack or a positive output gap.
According to a survey conducted by The Wall Street Journal last month, nine out of 14 analysts predicted a rate reduction in the first half of 2024.
Bank of Canada Governor Tiff Macklem informed Members of Parliament that if inflation does not slow as expected, the central bank may need to raise rates once again. The central bank anticipates inflation to reach 3.5% by mid-2024 and 2% by the end of 2025. The central bank sets interest rates with the objective of achieving and maintaining 2% inflation.
Based on the survey, nearly two-thirds of the respondents said that inflation will be 3% or higher by the end of this year. By the end of 2024, 64% of the respondents expected inflation to remain within the range of 1% to 3%.
When asked about the possibility of a recession, the median of 26 responses indicated a roughly 50% probability of two consecutive quarters of recession within the next six to 12 months.
Write to Paul Vieira at [email protected]
Source: www.marketwatch.com
