Bank of Canada may cut rates in 2024 - governor

It all depends on one condition…

Bank of Canada may cut rates in 2024 - governor

The Bank of Canada may cut interest rates next year, but its governor said that there needed to be several months of sustained downward momentum in core inflation beforehand, as reported in an article by Bloomberg.

Tiff Macklem, the central bank’s governor, stated that the lowering of the benchmark overnight rate may happen sometime in the upcoming year. However, he stated that policymakers needed to see a number of months of deceleration in underlying inflation first.

The governor’s statement highlighted a shift in the focus of officials as they have moved on from how high rates need to go, to how long they should stay at their current levels.

Last week, the Federal Reserve held borrowing costs steady, but forecasts show a consensus that rate cuts will occur in 2024. Jerome Powell, the Federal Reserve’s chair, said that policymakers were turning their attention to when they should cut down on rates as inflation continued descending closer to its target 2% goal.

Meanwhile, the Bank of Canada’s three-month moving average of the trim and median core rates slowed to 2.96% in October, which was within the central bank’s inflation control range of 1-3% for the first time since March 2021.

“We are certainly feeling more confident that monetary policy is working and increasingly the conditions are in place to get us back to 2% inflation,” said Macklem.

“We’re not there yet. There are a few more things we need to see to be more confident that we’re headed back to 2% and we’re watching those closely,” he added.

Macklem also stated that he believed that borrowing costs were unlikely to fall back to their pre-pandemic levels.

“We had 10, 12 years of unusually low interest rates post-global financial crisis. I think there are good reasons to believe that we’re not going back to those very low rates,” he said.

The Bank of Canada will be releasing a summary of deliberations for the decision in December where the interest rates were held at 5% for the third consecutive meeting.