MNI BRIEF: BOC Could Cut Rates In Summer 2024, BDC Says

Canada's central bank could cut borrowing costs as early as next summer, the federal government's small business lender said in a report published Thursday.

"By then, the economy will have slowed sufficiently for pressure on production capacity to have eased domestically," Business Development Bank of Canada said in its monthly outlook. "However, to reach the inflation target, interest rates will have to remain higher than we had grown accustomed to during the past decade. This is because our economy is subject to multiple constraints that will persist, including an aging population, the reorganization of supply chains following the pandemic, and rising uncertainty and geopolitical risks."

"We expect the bank to bring the policy rate back close to 2.5% -- considered the neutral rate -- but this is not likely to happen before 2025," the BDC report said. (See: MNI INTERVIEW:Productivity Curbs BOC Cut Enthusiasm-Ex Adviser)

Bank of Canada officials including Governor Tiff Macklem have said it's too soon to begin discussing the timing of eventual interest rate cuts, particularly given that policymakers have yet to rule out further increases.