July 13, 2024

Bank of Canada to cut interest rates in half by end of next year: Desjardins

First cut could come in April if inflation and economy slows further

Canadians can expect the Bank of Canada to start providing some respite this spring as the central bank “slowly but surely” moves towards its first interest rate cuts, says Desjardins Group.

Chief economist Jimmy Jean says Desjardins is forecasting the first rate cut in June, but it could “easily” arrive as soon as April if inflation and the economy slow more than expected.

“We are seeing the damage caused by that very aggressive monetary policy,” Jean said in an interview with the Financial Post’s Larysa Harapyn. “It’s time to cut rates.”

After the first cut, Desjardins expects the central bank will reduce rates by 25 basis points at every meeting this year and into 2025. By the end of next year, it predicts interest rates will be roughly half of what they are now.

That reduction would put the Bank of Canada’s key overnight rate — currently at five per cent — at 2.5 per cent by the end of 2025, according to Desjardins’ forecast.

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