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  • Steve Huebl

Market participants expect first rate cut as early as April 2024


A survey of influential economists and analysts shows many are expecting the Bank of Canada’s first rate cut by April 2024.


The findings are from the Bank of Canada’s third-quarter Market Participants Survey, which consists of a questionnaire sent to 28 financial market participants.


Based on the median survey results, the participants expect the Bank of Canada to cut its policy rate by 25 basis points starting in April—a month later than in the Bank’s Q2 survey. Respondents expect the Bank to cut rates by a full percentage point in 2024, which would bring the overnight target rate back down to 4.00%.


A median of respondents see rates falling another half-point by the first quarter of 2025, and down to 3.00% by Q3.


Three quarters of the respondents said the balance of risks around their forecasts for the policy rate is “skewed to a higher path.” However, market participants were unanimous in believing that we’ve already reached the peak rate of the current cycle of 5.00%.


Following the recent plunge in bond yields, markets have moved up their own forecasts for the central bank’s first rate cuts, with roughly 80% odds of a quarter-point cut by March 2024.


50-50 odds of a recession

The survey also found that a median of experts peg the odds of a recession in the next six to 12 months at 48%, up from 40% in the previous survey.


Looking out over the next six months, the respondents see a 40% chance that the economy will be in recession, down from 50%.


The responses also show the GDP growth is expected to average 1% by the end of 2023, rising slightly to 1.2% by the end of 2024. That’s not far off the Bank of Canada’s official forecast of 1.2% average annual GDP growth in 2023, dipping to 0.9% in 2024.


Steve Huebl

Bank of Canada

November 6, 2023

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