The BoC governor is anticipating inflation will hover at around 3.5% until summer 2024, before reaching 2% sometime in 2025
Bank of Canada Governor Tiff Macklem said that while the institution is keenly aware of the impact of its aggressive rate hikes on Canadians’ finances, he can’t promise a specific timeframe for when rate cuts will take place.
“I understand exactly how people are feeling, but I also don’t want to give them false precision,” Macklem said in an interview with CBC’s “The Current” radio program.
“When we start to see clear evidence that we’re on a path back to 2% [inflation] … that’s when we can start to have the discussion about lowering interest rates.”
Macklem is anticipating inflation will hover at around 3.5% until summer 2024, but “if we’re lucky, we’ll start to see clearer evidence it’s coming down before that.” He added that Canada’s annualized inflation rate will likely reach its 2% target by 2025.
“The economy’s not overheated anymore … we do think there’s more inflation relief in the pipeline,” he said. “And if that comes through, we won’t have to raise rates further.”
While the Bank of Canada is concerned about inflation, its strategy to curb it and cool the economy appears effective.
— Canadian Mortgage Professional Magazine (@CMPmagazine) October 25, 2023
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Economic lethargy will prompt rate cuts
Some market observers argue that an expected prolonged period of subdued economic performance will significantly weigh on the BoC’s rate cut plans.
David Rosenberg, of Rosenberg Research, told BNN Bloomberg that the central bank had succeeded in putting “the inflation genie back in the bottle.”
“A recession has already begun,” he said. “When you strip out all the nonsense, such as mortgage interest rates in the consumer price index, inflation in Canada is running right at target.
“Rates are going to be coming down much more quickly and forcefully than the markets [have] priced in right now.”
