Bank of Canada seen holding rates at 5% as economy avoids recession

The economy will stall in the second half of 2023, but not shrink, according to a monthly Bloomberg survey of 27 economists. Medium prognosis sees Bank of Canada keep its overnight rate at five percent until next year — with no rate cut until April.

The results support the Bank of Canada’s view that economic growth is slowing while core inflation remains elevated. Governor Tiff Macklem said this month that policymakers are trying to balance the risks of too much and too little tightening and avoid making “economic conditions unnecessarily painful for everyone.”

An unexpected increase in household spending earlier this year prompted the central bank to raise rates in June and July after a brief pause. But consumer spending growth is expected to slow next year as demand for rate-sensitive goods and services weakens and more households renew their mortgages at higher rates.

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