The Elephant in the Room - When will Rates Come Down?

Economists anticipate Canadians will have to wait a few more months for relief from high interest rates, with the timing of cuts dependent on economic data. The Bank of Canada’s recent decision to maintain rates at five percent aligns with projections, and the central bank hints that rate hikes are likely behind, signaling a shift in discussions toward how long the current stance will be maintained.

Governor Tiff Macklem emphasized caution, stating that the risk of a rate hike is not zero and further increases may be necessary. The decision reflects the bank’s patience and goal of curbing inflation, with a target of hitting two percent over time.

Dawn Desjardins, chief economist at Deloitte Canada, suggests the first rate cut could come in the spring, emphasizing the importance of monitoring inflation numbers. Ed Devlin, founder of Devlin Capital, anticipates cuts in June with a total of four cuts of 25 basis points expected for 2024. However, not all analysts agree on the timeline, as David Wolf from Fidelity Investments cautions against certainty and Deputy Bank of Canada Governor Carolyn Rogers emphasizes the need to stay the course.

Avery Shenfeld, chief economist of CIBC Capital Markets, sees a dovish tilt in the bank’s approach and expects a first rate cut in June. Brooke Thackray, research analyst at Horizons ETFs, points to the importance of upcoming GDP data on Feb. 29 in projecting future cuts.

For a detailed analysis and varied perspectives on the timing and impact of potential interest rate cuts, please read the full article click here