The Bank of Canada will hold interest rates at the 15-year high 4.50 per cent until the end of 2023, before starting to cut rates at the start of next year, a median of market participants said in the central bank’s survey released on Monday.
The survey, the second iteration of the poll of market participants first released in February, showed a median of the participants forecasting interest rates dropping to 3.00 per cent by the end of 2024.
Market participants in the first survey released in February had said rates would fall to 4.0 per cent by the end of the year.
A median of 26 participants predicted a 0.1 per cent contraction of gross domestic product at the end of 2023, compared with a 0.4 per cent decline forecast in the last survey.
The participants, surveyed from March 9 to 23, cited weaker housing market and tightening of financial conditions among top risks that could curtail Canadian growth.
The bank raised interest rates eight consecutive times through January in an effort to cool high inflation that peaked at a four decade high last year.
The bank has since kept rates steady at two meetings, in part because Governor Tiff Macklem has said the goal is to slow growth, but avoid a recession.
Annual inflation rate eased to 4.3 per cent in March, but is still more than double the bank’s 2 per cent target. The bank expects to hit its inflation target by the end of next year.
The median forecast for annual inflation is 2.7 per cent at the end of the year, compared with a previous estimate of 2.9 per cent.