Trudeau expects Canadian interest rates to come down in 2024

Canadian Prime Minister Justin Trudeau expects interest rates are going to start coming down by the middle of next year, in-line with recent Reuters poll estimates, though the latest economic data has turned the central bank more hawkish.

“We know things are going to start getting better. Inflation is coming down. We think interest rates are going to start coming down probably middle of next year,” Trudeau told the New York Times in an interview just before returning to Canada after attending the United Nations General Assembly.

Trudeau’s popularity as measured by opinion polls has dropped as Canadians deal with a cost-of-living crisis, sparked by the central bank’s record pace of interest rate increases to tame inflation.

While the inflation has eased from its peak, the August CPI rose to 4% coming in above the central bank’s 2% target, and the Bank of Canada Governor Tiff Macklem said that rates may not be high enough.

A majority of economists, 24 of 34, polled between Aug. 24-30 expect the BoC to keep its policy rate at the current level of 5% or higher until at least the end of March 2024. The median shows 50 basis points worth of cuts by the end of June next year, in line with expectations for the U.S. Federal Reserve.

Trudeau has waded into a sensitive monetary policy debate and past comments on interest rates by his government and other provincial politicians have raised questions about the independence of the central bank.

Earlier in the month, Finance Minister Chrystia Freeland defended the BoC’s independence after her comments that the central bank’s decision to hold the interest rate steady “is welcome relief for Canadians” raised concerns to the contrary.

The Prime Minister’s Office declined to comment on Saturday on Trudeau’s remark.

The Conservative Party Leader, Pierre Poilievre, has blamed the Trudeau government’s massive spending during the pandemic for the inflation and the affordability crisis.

“People are mad at governments because things aren’t going all that well and people are worried. So, yeah, it’s a tough time,” Trudeau told the paper.