Could the Bank of Canada cut interest rates next week?

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Recent indications of a still-strong labour market may have given the Bank of Canada pause for thought on its rate-cut timeline, even if overall inflation fell by more than expected at last reading to 2.9%.

Keith Reading (pictured top), senior director of research at real estate firm Morguard, told Canadian Mortgage Professional that while economic factors largely appear to be trending in the right direction for the Bank, they will likely be eager to pour cold water on the prospect of an unexpected uptick in economic activity.

“Right now, I think the Bank of Canada is hinting that rate cuts might be a little further off than first anticipated,” he said. “There were a lot of people thinking the spring or summer of this year. But I think the Bank is sort of [indicating], ‘Hold on – it may be a little bit longer.’

“Part of that is we’ve had a pretty good job growth figure to open January, and inflation has certainly come down. But we’re still not at the 2% target that the Bank likes – so it may take longer for rates to come down.”

How much will the Bank of Canada eventually cut rates by?

Desjardins’ outlook calls for five 25-basis-point cuts to both the Canadian and US overnight rates in 2024, with further declines expected to take place next year. Reading said he’s expecting a cautious approach from the central bank, although the onset of cuts is likely to help boost investor confidence and bring them off the sidelines.  

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