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REPUBLIKA.CO.ID, OTTAWA — The Central Bank of Canada will begin cutting interest rates in the second quarter of 2024. The policy is supported by inflation and the economy starting to slow. Economists interviewed by Reuters estimates that core borrowing costs will decline by at least one percentage point by the end of 2024.

Governor central bank Canada's Tiff Macklem said in a recent speech that interest rates could now be quite tight. “With excess demand disappearing and weak growth continuing, most people have concluded that central banks are done raising interest rates. Right now is not the time to start to think about cutting interest rates,” Macklem was quoted as saying. ReutersFriday (01/12/2023).

Even though the economy is estimated to have grown by 0.2% on an annual basis in the last quarter after contracting by 0.2% in April-June 2023, inflation has fallen significantly to 3 .1% last month. This decline occurred after a peak of 8.1 percent in June 2022.

One of the 26 economists interviewed Reuters conducted from November 27 to 30, it is estimated that the BOC will now maintain interest rates at 5% until March 2024. Similar to the US Federal Reserve's forecast, only Barclays forecasts another 25 basis point rate increase in January 2024.

“It has become clear over the last two quarters that interest rates in the 5% range are a significant obstacle. “It's desirable now as the BOC seeks to reduce inflation, but it's too difficult to sustain over the next full year,” said Avery Shenfeld, chief economist at CIBC Capital Markets.

The survey estimates Central Bank of Canada will start cutting interest rates from the second quarter of 2024. The interest rate reduction is expected to be 100 basis points next year, higher than the Fed's expectation of 75 basis points.

Additionally, about 70 percent of economists expect interest rates to be 4 percent or lower by the end of 2024. This figure is well below the Fed's forecast, which is between 4.5 and 4 percent. .75 percent.

“The Reserve Bank of Canada will look ahead to keeping its key interest rate at 5 per cent and essentially conclude that the rate hike cycle has succeeded and that it needs to start moving towards monetary policy more normal,” said RBC's deputy chief economist. Robert Hogue.