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CIBC's Benjamin Tal: Canadians Anticipate Interest Rate Cuts Possibly in the Next Summer

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Canadians May Have to Wait Until Next Summer for Interest Rate Cuts, Says CIBC's Benjamin Tal

According to CIBC economist Benjamin Tal, Canadians hoping for lower interest rates, particularly those looking to renegotiate their mortgages, may have to wait until the middle of next year for the Bank of Canada to begin cutting rates. Tal believes that the central bank will take its time before implementing rate cuts, possibly waiting until June or July of next year. This delay in rate cuts can be seen as a way of tightening monetary policy by keeping interest rates high for a longer period. The Bank of Canada has raised its benchmark lending rate 10 times since March 2022, reaching a 22-year high of five percent. These rate hikes were aimed at curbing inflation, which peaked at 8.1 percent in June 2022 but has since slowed to 3.8 percent in September. Tal suggests that if the trend continues to show a decline in inflation, reaching levels around 2.5 to 2.3 percent, the central bank may start cutting interest rates. Tal also highlights the potential impact of high interest rates on the housing market. He states that the housing market is already in a recession and could face another significant shock if rates remain high in 2025 and 2026, when a large number of outstanding mortgages are due to be reset. Tal estimates that the central bank will gradually reduce rates, with a pause at three percent by the end of 2025. While challenges remain for the Bank of Canada, Tal is not overly concerned about the high level of wage growth, which is currently running at four to five percent. He believes that wages will eventually ease and that the central bank simply needs to wait for the weaker economy to weaken inflation. In conclusion, Canadians may need to exercise patience as they await potential interest rate cuts, with the Bank of Canada expected to take its time before implementing any changes. The timing of rate cuts, potentially in the middle of next year, will have implications for mortgage holders and the overall housing market.

Hot Take: The Impact of Delayed Interest Rate Cuts on New Businesses in Canada

Waiting Game: The Central Bank's Stance

CIBC economist Benjamin Tal's prediction that Canadians may have to wait until mid-next year for interest rate cuts could have significant implications for new businesses. The Bank of Canada's decision to delay rate cuts, as suggested by Tal, can be seen as a method of tightening monetary policy by maintaining high interest rates for an extended period.

Rate Hikes and Inflation

The central bank has been proactive in curbing inflation by raising its benchmark lending rate multiple times since March 2022. If inflation continues its downward trend, reaching levels around 2.5 to 2.3 percent, the central bank may start cutting interest rates.
Implications for the Housing Market and New Businesses
Tal's warning about the potential shock to the already recession-hit housing market due to high interest rates in 2025 and 2026 is alarming. This could affect new businesses, particularly those in the housing and construction sectors, as it could lead to reduced demand and slower growth. In conclusion, the delay in interest rate cuts and its potential impact on the housing market and overall economy could pose challenges for new businesses in Canada. These businesses must brace themselves for possible economic fluctuations and plan their strategies accordingly.
Story First Published at: https://financialpost.com/news/economy/bank-of-canada-interest-rate-cuts-unlikely-until-summer-cibc
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