April 25, 2024
Financial experts in Canada now expect more hesitation about interest rate cuts and consider a recession less likely in the short term, according to the latest Bank of Canada (BoC) market participants survey.
The first-quarter survey canvassed 27 economists and financial strategists from March 7 to 15, ahead of inflation data released in mid-April that largely matched expectations.
In the survey, the median expectation for real GDP growth in 2024 rose to one per cent from 0.8 per cent in the survey from the fourth quarter of 2023. Expectations for a recession in the next six months dropped, with the median probability at 35 per cent in the most recent survey, versus 48 per cent in the previous survey.
The experts’ median forecast for the BoC’s benchmark interest rate at the end of 2024 is unchanged at four per cent (from the current level of five per cent), but fewer think it will go lower than that. At the end of 2023, the 25th percentile of responses was 3.5 per cent, meaning a quarter of those surveyed expected the rate to be 3.5 per cent or less. In the most recent quarter, the 25th percentile view has risen to four per cent.
Expectations for interest rates in 2025 are similar. The median forecast is three per cent, unchanged now from views in the fourth quarter of 2023, but the experts’ median forecasts for the months leading up to December 2025 see the cuts rolling out more slowly, hitting 3.5 per cent in Q2 2025 and 3.25 per cent in Q3. At the end of 2023, the median forecast was for rates to reach three per cent in Q2 2025.
Forecasts on inflation were largely unchanged, with the median forecast on annual consumer price index in 2024 remaining 2.3 per cent and 2.1 per cent in 2025.
The BoC has formally published the quarterly survey results since February 2023, following a pilot project in 2019. Around 30 experts are surveyed each quarter. The BoC says the information “informs Bank staff analyses and complements other Bank market intelligence activities.”
