News release

Bank of Canada not expected to cut rates before Q2 2024, new report finds

Latest report examines how the country’s economy is steadily cooling after months of higher inflation.

Sep 14, 2023

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TORONTO, ON - (September 14, 2023) - RSM Canada ("RSM"), a leading global provider of assurance, tax and consulting services, today launched its latest edition of The Real Economy Canada – a quarterly report that provides Canadian businesses with analysis and insights on the country's complex economic conditions. The “real economy” is the segment of the economy that produces the goods and provides the services we rely on every day.

With the Bank of Canada recently holding its September interest rate, RSM Canada’s latest report examines how the country’s economy is steadily cooling after months of higher inflation, however initial predictions of a recession this year are now unlikely and more feasible in the second half of 2024. With these conditions in mind, the earliest opportunity for interest rate cuts will be the second quarter of 2024.

The report also explores a key measure that Canada can explore to drive more productivity and growth - capitalizing on its recent policy to increase immigration by tapping into the underutilized skilled labour coming into Canada.

There are also special sections on the opportunities for Canadian businesses as Canada looks to support the shift to Electric Vehicles (EVs), and how an oversaturated streaming market is driving competition among market leaders to retain subscribers.

Key findings in this quarter’s report include:

Prospects of a 2023 recession have been pushed until 2024:

  • In RSM Canada’s updated economic forecast, Canada’s recession probability over the next 12 months has lowered to 60% from 75%.
  • Inflation has also declined to 2.8%, the lowest among G7 countries. The decline is an encouraging sign that a rate peak is in sight for the Bank of Canada.
  • The Canadian economy will remain steady in the last quarter, with a slowdown continuing into the first half of next year.

Bank of Canada’s first rate cut will not come before the second quarter of 2024:

  • While job vacancies remain elevated above pre-pandemic levels, they have decreased to the lowest level since May 2021. That decline indicates a cooling labour market and is a trend we expect to continue through the year’s end.
  • At the same time, Canadian household debt levels have ballooned, standing at 180% of income. According to the Bank of Canada, over a third of mortgage borrowers have seen their interest payments rise, with more to come as more mortgage terms expire.
  • The Bank of Canada will closely monitor core inflation, labour demand and consumer spending as it tries to walk the fine line to restore price stability while not over-tightening.
The Canadian economy has displayed remarkable resilience this year, defying expectations of a downturn. While we may muddle through the rest of the year with slower growth, Canada will likely avoid a recession this year. In addition, a 40% probability of a soft landing is promising thanks to our strong labour demand, healthy consumer spending and a housing market that is still robust. All these factors are in part fueled by Canada’s ambitious immigration policy and healthy household savings from the pandemic.
Tu Nguyen, Economist, RSM Canada

For more information on The Real Economy Canada, or to download the report, please visit their webpage.

About RSM Canada

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RSM Canada LLP provides public accounting services and is the Canadian member firm of RSM International, a global network of independent assurance, tax and consulting firms with 64,000 people in 120 countries. RSM Canada Consulting LP provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. For more information visit, like us on Facebook, follow us on X and/or connect with us on LinkedIn.