Bank of Canada Interest Rate Forecast 2024-2025

In this article, we will discuss the Bank of Canada Interest rate forecast 2024-2025. In the world of real estate and finance, few things impact homeowners as significantly as the trajectory of mortgage rates.

The decision to secure a mortgage is one that will ripple through the years, impacting financial stability and opportunities.

For Canadians, 2023 presents a crucial juncture, with the direction of mortgage rates hanging in the balance.

Bank of Canada Interest Rate Forecast 2024-2025

Today, with an unprecedented level of debt in the economy, even a modest 0.25% rate increase carries a far more substantial impact than in previous years when debt levels were significantly lower. This exerts continuous downward pressure on interest rates.

Currently, the Bank of Canada’s prime interest rate stays at 7.20% with a 5.0% policy rate.

Year	Bank of Canada Interest Rate Forecast	Canada GDP Growth Prediction	Canada Economy Growth Forecast
2023	Prime Interest Rate: 7.20%	2.9%	1.2%
2024	Prime Interest Rate: 8.20%	2.3%	0.9%
2025	Prime Interest Rate: 5.20%	2.6%	2.5%

In a significant move, the Bank of Canada has maintained its target for the overnight rate at 5%, accompanied by a Bank Rate of 5¼% and a deposit rate of 5%. The central bank has reaffirmed its commitment to a policy of quantitative tightening.

The Bank of Canada interest rate might be increased by 1% in 2024 due to an elevation in inflation and a dropdown in the Canadian economy. Oil prices are still high. The lack of supplies increases inflation in Canada.

The Canadian economic growth is still predicted to be weak in 2024. Canada’s economic growth forecast will be 0.9% in 2024. With this, the Bank of Canada interest rate prediction might be high like 8.20% in 2024. The Canadian GDP growth forecast will be as low as 2.4% in 2024.

The Bank of Canada interest rate forecasted might be a little reduced in 2025 by 2%. Due to this, Canadian economic growth will be increased by 2.5% in 2025.

Now, as we all know, the Israel and Gaza War is happening in the world. This will also be the reason for increase the inflation in the world. Due to this, the interest rates might increase in Canada in 2024.

This decision comes against the backdrop of a dynamic global economic landscape, and it signals the bank’s stance on addressing both internal and external economic factors.

In Canada, the interest rates have increased in the past that falling off the economic activity and elevating inflation. Low supplies, high demand, and high borrowing costs are considered the business investment right now.

In recent months, consumer price index (CPI) inflation in Canada has displayed volatility, oscillating between 2.8% in June, 4.0% in August, and 3.8% in September. The impact of higher interest rates is evident in moderating inflation for credit-financed goods, with this trend gradually extending to services.

While food inflation is receding from its peak levels, inflation in rent and housing costs remains elevated. Short-term inflation expectations, along with corporate pricing behavior, are undergoing a gradual normalization process.

Wages continue to grow at a rate of approximately 4% to 5%. The Bank’s preferred measures of core inflation suggest minimal downward momentum.

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Next Interest Rate Hike Canada Date

The Bank of Canada interest rate next hike will be announced on December 06, 2023. The bank will publish its full details about the inflation and economy on January 24, 2024.

The key factors guiding this decision include the desired downward momentum in core inflation, a focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behavior.

The Bank continues to be steadfast in its commitment to restoring price stability for the benefit of all Canadians.