Canada Housing Market

In a move anticipated to bring significant financial relief to Canadians, the Bank of Canada is gearing up to initiate a series of interest rate reductions starting this spring. According to Desjardins Group, this strategic adjustment aims to alleviate the economic strain experienced by many, marking a shift towards more accommodating monetary policy.

Desjardins Group’s Chief Economist, Jimmy Jean, has outlined a timeline for these adjustments, forecasting an initial rate cut as early as June. However, Jean suggests that if inflation and economic activity decelerate more sharply than currently projected, we could see this relief come as soon as April.

Jean shared insights with the Financial Post, highlighting the urgency of this shift. “The toll of the previous stringent monetary policy is becoming increasingly evident, necessitating a move towards rate cuts,” Jean remarked.

Desjardins anticipates that the Bank of Canada will enact a consistent reduction of 25 basis points at subsequent meetings throughout this year and into 2025. This gradual approach is expected to culminate in the key overnight rate, presently at 5 percent, being slashed to 2.5 percent by the close of 2025, aligning with Desjardins’ projections.

Jean also noted the comparative sensitivity of Canada’s economy to interest rate fluctuations, especially when juxtaposed with the United States. While the U.S. economy has demonstrated remarkable resilience and growth in 2023, Canada faces a starkly different reality, with economic indicators suggesting a recession, particularly when analyzed on a per-capita basis.

Moreover, with an anticipated decline in wages throughout the year, Desjardins believes the Bank of Canada will gain the confidence needed to proceed with the proposed rate reductions. This strategic move is poised to offer a much-needed economic reprieve, signaling a proactive approach to mitigating the financial hardships faced by Canadians.

Source: Bank of Canada seen cutting interest rates in half by end of 2025 | Financial Post