In the company’s fall economic outlook released Thursday, it forecasts the central bank’s interest rate will fall to 3.75% by the end of this year and a neutral rate of 2.75% by mid next year.
Meanwhile, it expects the economy to grow moderately as softer labour market conditions persist, especially as many home owners have yet to face higher rates when they refinance their loans.
“We do think that we’re going to be in for a decent year next year,” said Dawn Desjardins, chief economist at Deloitte Canada.
It appears Canada will successfully skirt a recession despite the impact of higher borrowing costs on the economy, said Desjardins.
“It’s hard to argue that the economy is just skating through this period of higher interest rates. But having said that, the overall numbers themselves continue to show the economy is expanding,” she said.
“Yes, the labour market has softened, but I don’t think we’re in any kind of crisis in the labour market at this time.”
Higher interest rates impacting economic growth, labour market
The Bank of Canada has cut its benchmark rate three times so far this year as inflation has eased, and signalled more cuts are coming.
Inflation in Canada hit the central bank’s 2% target in August, falling from 2.5 in July to reach its lowest level since February 2021.