Bank of Canada likely to cut interest rates to 50% by end of 2025 - Desjardins

Big relief anticipated for Canadians looking for interest rates cut

According to Desjardins Group, as Bank of Canada is planning it’s “slowly but surely” approach for its first interest rate reduction, Canadians who have been struggling with high interest rates can anticipate the bank offering some relief this spring.

Desjardins is predicting the first rate decrease in June, according to chief economist Jimmy Jean, but if inflation and the economy slows down more than anticipated, it could “easily” happen as early as April. This is a great news welcomed by citizens, who are looking for a way to get out of the financial burden caused by high interest rates.

Desjardins anticipates that the central bank will lower rates by 25 basis points at each meeting this year and into 2025 following the initial cut. It projects that interest rates will be about half of what they are today by the end of the next year.

Desjardins predicted that by the end of 2025, the Bank of Canada’s key interest rate, which is currently at 5% , would have dropped to 2.5%.

our economy is much more sensitive to interest rates – Jimmy Jean

Because “our economy is much more sensitive to interest rates,” according to Jean, the Bank of Canada does not have a similar margin of error as the Federal Reserve of the United States to maintain rates higher for longer.

According to Jean, 2023 was “a fantastic (year)” for the US economy. “Every figure has exceeded predictions. The strength has even taken the Fed by surprise.

On the contrary, when looking at the economy per capita, Canada has already entered a recession, according to Jean.

Jean, the chief economist and strategist, predicts that this year will see a beginning of wage declines, giving the “Bank of Canada further confidence that it’s time to cut rates.” 

Canadians have their fingers crossed on this news and hope this comes true. Only time will tell if all of this news will be a reality.