2024 Predictions: Interest Rate Cuts to Come
I believe that interest rates will drop in 2024, the question is when and how low. After we saw the quickest run-up in interest rates in over 30 years the prime rate went from 2.45% up to 7.2% spanning from March 2022 to July 2023. Homeowners and homebuyers have been waiting for rates to be cut ever since. In this blog, I will be going over why rates will drop in 2024, when we can expect to see the first-rate cuts, and how far they will drop.
The Economy’s Slowdown: A Catalyst for Change
The economy is evidently slowing down, and rate decreases are likely to be implemented to revitalize economic activity. While inflation still hovers above the Bank of Canada’s target range of 1-3%, it’s crucial to remember that inflation is a lagging indicator. I anticipate that inflation will continue to decline as the impact of high interest rates works its way through the economy.
The Delicate Balance of Rate Adjustments
The Bank of Canada faces a delicate task: maintaining rates high enough to prevent an economic spiral but not so high as to deepen the recession. Conversely, they must be cautious not to slash rates too drastically, avoiding a sudden spike in inflation.
The key lies in finding a middle ground. Expect gradual adjustments, possibly in increments of 0.25% per cut. This slow and steady approach aims to avoid shocking the economy, much like the rapid changes we observed on the way up.
The first rate cut could be announced as early as March 8th or during the April 12th announcement. A reduction of 0.25% seems probable for these initial cuts in my prediction.
By the end of 2024, I foresee that the prime rate could fall to the low 6% range, and perhaps even into the high 5% range if we’re fortunate. This forecast is based on the belief that the Bank of Canada will exercise caution to avoid overcorrection during the descent.
This rate range would allow the Bank of Canada to methodically lower the overnight rate, using incoming economic data to guide future decisions. Such a strategy not only stabilizes the economy but also provides a predictable environment for both homeowners and buyers.
It’s important to keep in mind that these are just predictions and should be taken with a grain of salt. No one, not even the Bank of Canada knows where our economy is headed but the best we can do is analyze the data on hand and use that to make informed predictions and decisions.
I hope you gain some insight from this blog, if you did please share this blog with a family member or friend who’d also benefit from reading it.
If you have any questions, feel free to reach out to my office at 519-250-4848 or email [email protected] and either myself or one of my mortgage advisors will be happy to help.
Rasha Ingratta
