Lower interest rates are yet to do much to spur the economy, but green shoots are emerging, with the timely activity surveys picking up and the newly-announced mini-fiscal stimulus expected to boost consumption over the coming months. That said, strong curbs on immigration will mean GDP growth is unlikely to accelerate much in 2025 and 2026, and excess supply will only be absorbed slowly. We therefore expect the Bank of Canada to cut its policy rate at each meeting until it reaches a below-neutral level of 2.00% in the second half of next year, which would be much lower than markets expect.
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