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Canadian Prime Minister Justin Trudeau predicts that Canadian Interest Rates will begin to decline by the middle of next year, aligning with recent estimates from a Reuters poll. This expectation comes in spite of the central bank’s increasingly hawkish stance, driven by the latest economic data.
Inflation Easing, But Concerns Remain
“We know things are going to start getting better. Inflation is coming down. We think interest rates are going to start coming down probably in the middle of next year,” Trudeau stated in an interview with the New York Times just before returning to Canada after his attendance at the United Nations General Assembly.
Political Impact of Rising Costs
Trudeau’s popularity, as measured by opinion polls, has waned as Canadians grapple with a cost-of-living crisis triggered by the central bank’s rapid series of interest rate hikes aimed at taming inflation.
Although inflation has eased from its peak, the August Consumer Price Index (CPI) registered at 4%, surpassing the central bank’s 2% target. Bank of Canada Governor Tiff Macklem has even hinted that rates might not be high enough.
Economic Forecasts and Central Bank Policy
A majority of economists, 24 out of 34, polled between August 24-30, expect the Bank of Canada (BoC) to maintain its policy rate at the current level of 5% or higher at least until the end of March 2024. The median projection suggests a 50 basis point reduction by the end of June next year, in line with expectations for the U.S. Federal Reserve.
Trudeau has waded into a contentious monetary policy debate, with his past comments on interest rates and those of other provincial politicians raising questions about the central bank’s independence.
Earlier this month, Finance Minister Chrystia Freeland defended the BoC’s independence after her remarks, stating that the central bank’s decision to keep interest rates steady “is welcome relief for Canadians,” raised concerns to the contrary.
Challenging Times for Leadership
The Prime Minister’s Office declined to comment on Trudeau’s statement, while Conservative Party Leader Pierre Poilievre attributed inflation and the affordability crisis to the Trudeau government’s massive pandemic spending.
“People are upset with the government because things aren’t going all that well, and people are concerned. So, yes, it’s a challenging period,” Trudeau remarked.
Disclaimer: Please note that this article serves solely for informational purposes and should not be construed as financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.
