That’s according to the Bank of Canada’s latest quarterly Market Participants Survey, which consists of a questionnaire sent to 28 influential financial market participants.
Based on the median of results, the respondents believe the central bank will deliver four more quarter-point rate cuts by June 2025, bringing the policy rate to 2.75%, before remaining on hold through to the end of 2026.
This forecast is in contrast to that of several big banks, such as RBC and National Bank, which are forecasting another 175 basis points (1.75 percentage points) of rate relief by the end of 2025, bringing the policy rate to 2.00%.
Even within the 25th percentile of responses in the Market Participants Survey, respondents only see the policy rate falling to 2.25% in early 2026 before rising to 2.50% in the second half of the year.
However, a majority of respondents (70%) do say the balance of risks in their forecast casts are “skewed to a lower path.”
Recession concerns ease amid stable growth forecasts
Expectations for a Canadian recession have also moderated in recent months.
In the Q3 survey, respondents estimated a 20% likelihood of recession in the next six months, down from 22.5% in Q2, and 25% odds in the following 6 to 12 months, compared to 30% previously.
Similarly, most respondents see just a 25% chance of recession in the next 12 to 18 months, also down from 30% in the Q2 survey.
Most financial experts predict a GDP growth rate of 1.5% for 2024, slightly above the central’s bank’s 1.2% forecast. Most then see growth picking up to an average of 1.9% in 2025, lower than the Bank of Canada’s 2.1% full-year forecast.
Respondents identified key growth drivers as a stronger housing market, looser monetary policy, and easing financial conditions. On the downside, they highlighted increased geopolitical risks, tighter financial conditions, and lower commodity prices as the primary threats to their forecasts.
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Bank of Canada bank of canada rate forecast forecasts gdp growth Market Participants Survey recession outlook
Last modified: November 4, 2024
