The hope is Canada will see interest rates start to fall later this year, an economist told a room full of automotive professionals.
Specifically, it won’t be until at least the second quarter of 2024, said Thomas Feltmate, senior economist at TD Bank at the Canadian Black Book Talk Auto 2023 conference.
But once those cuts start, they should be coming with regularity.
“And then once they do start to cut, we expect that the bank account will probably cut a bit faster than the [U.S.] Federal Reserve,” Feltmate predicted. “So ultimately, what this means is thinking about longer term interest rates, the differential that we’re seeing between the U.S. and Canada is likely to still remain somewhat elevated.”
The global economy has been more resilient than anticipated and it doesn’t appear a recession will hit much of the world, including Canada.
Not many thought that would be achievable to have inflation at multi-decade highs and central banks rapidly increase interest rates to tie down inflation and not go into a recession, Feltmate explained.
When it comes to Canada, he noted that some remain on the fence that a recession will happen here. Feltmate compared to the U.S. where many who believe a recession will happen there continue to firmly believe that’s still the case.
“Certainly, the takeaway here is that things have been stronger in North America than we had previously anticipated,” he said during an economic update at the event.
Canada went through several hurdles last year that impacted the economy and growth and yet a recession can still be avoided, Feltmate pointed out.
The wildfires of the spring and summer were one of those. “This would have impacted not only oil production in Alberta but probably had some knock-on effects to tourism and just general consumer spending patterns overall,” he said.
Then federal workers went on strike, impacting 150,000. Port strikes in B.C. affected the flow of goods as well.
“So there’s these kind of one-off factors that are still playing into the data,” he said.