Market participants believe the central bank will not change its key lending rate this year

The latest poll by the central bank shows that most market participants expect the Bank of Canada to keep its key lending rate at the 15-year high level of 4.50% for the rest of this year. Rate cuts are predicted only for the beginning of 2024.

The second survey following the one in February showed a median of the participants expecting interest rates to go down to 3.00% by the end of the next year.

Meanwhile, the previous poll showed forecasts of rates falling to 4.00% by the end of 2023.

A median of 26 participants expected a 0.1% decline in GDP at the end of this year, compared with a 0.4% drop expected in the previous survey.

The respondents, surveyed from March 9 to 23, named the weaker real estate market and tightening of financial conditions as the main risks that could restrain Canadian economic growth.

As you know, the BoC raised its overnight rate eight times in a row in an attempt to fight the skyrocketing inflation that reached its highest level in 40 years in 2022.

During the two previous meetings, the Bank kept its key lending rate unchanged, partially because Governor Tiff Macklem says the goal is to slow growth, but avoid an economic recession.

Last month, the annual inflation rate slowed down to 4.3%, although it’s still more than double the Bank’s target level of 2%. The BoC expects to reach the target by the end of 2024.

The average forecast for annual inflation is 2.7% at the end of 2023, while the previous poll showed a forecast of 2.9%.