Market Participants Are Anticipating An Initial Rate Cut As Soon As April 2024

Market Participants Are Anticipating An Initial Rate Cut As Soon As April 2024 At a Glance

A survey of economists and analysts conducted by the Bank of Canada shows that many expect the bank’s first rate cut to happen by April 2024. Respondents expect a 25 basis point cut in April, with rates falling by a full percentage point in 2024. The survey also found that there is a 48% chance of a recession in the next six to 12 months, up from 40% in the previous survey. Regarding GDP growth, the survey shows that respondents project an average of 1% by the end of 2023, slightly increasing to 1.2% by the end of 2024. This aligns closely with the Bank of Canada’s official forecast of 1.2% average annual GDP growth in 2023, with a decline to .9% in 2024.

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Information Of The Anticipating Initial Rate Cut

According to a recent survey conducted by the Bank of Canada, influential economists and analysts anticipate the Bank’s first rate cut to occur by April 2024. The survey, known as the Market Participants Survey, involved 28 financial market participants who were asked to provide their insights.

Based on the median survey results, the participants predict a 25 basis point cut in the Bank of Canada’s policy rate, beginning in April. This projection is a month later than what was anticipated in the Bank’s Q2 survey. Respondents further anticipate a full percentage point reduction in rates throughout 2024, which would effectively bring the overnight target rate down to 4.00%.

The survey also highlights that a median of respondents expect rates to decline by an additional half-point by Q1 2025, reaching 3.00% by Q3. It is noteworthy that three-quarters of the respondents expressed their view that the risks surrounding their policy rate forecasts lean towards a higher trajectory. Nonetheless, all market participants are in agreement that the current cycle’s peak rate of 5.00% has already been reached.

In light of recent declines in bond yields, market forecasts for the central bank’s rate cuts have been adjusted, with approximately an 80% chance of a quarter-point cut by March 2024.

50/50 Chance of a Downturn

Moreover, the survey indicated a median expectation of a 48% probability of a recession occurring within the next six to 12 months. This figure represents an increase from the previous survey’s estimation of 40%. However, looking ahead to the next six months specifically, respondents perceive a slightly reduced chance of the economy falling into recession, currently at 40%.

Furthermore, the respondents’ projections suggest that GDP growth will average at 1% by the end of 2023, with a slight increase to 1.2% by the end of 2024. These figures are in line with the Bank of Canada’s official forecast, which anticipates an average annual GDP growth of 1.2% in 2023, subsequently decreasing to .9% in 2024.

Wrap Up

According to a survey conducted by the Bank of Canada, influential economists and analysts predict that the central bank will make its first rate cut by April 2024. The survey, which involved 28 financial market participants, revealed that respondents expect a 25 basis point cut in the policy rate starting in April, a month later than the previous survey. The participants anticipate a full percentage point cut in 2024, bringing the overnight target rate down to 4.00%.

By the first quarter of 2025, respondents expect rates to fall another half-point and reach 3.00% by the third quarter. Despite the expectations of rate cuts, three-quarters of respondents believe that the risks surrounding their forecasts are skewed towards a higher path. However, all market participants agreed that the current cycle’s peak rate of 5.00% has already been reached. Following a recent decline in bond yields, market forecasts for the central bank’s rate cuts have been adjusted, with an approximately 80% probability of a quarter-point cut by March 2024.

The survey also revealed that experts estimate a 48% chance of a recession occurring in the next six to twelve months, up from 40% in the previous survey. Over the next six months, respondents see a 40% likelihood of the economy entering a recession, down from 50%. The survey further indicates that GDP growth is expected to average 1% by the end of 2023, slightly increasing to 1.2% by the end of 2024. These figures align closely with the Bank of Canada’s official forecast of 1.2% average annual GDP growth in 2023, declining to .9% in 2024.

Market Participants Are Anticipating An Initial Rate Cut As Soon As April 2024 Chinese version