'The year of cuts': Senior economist's prediction for 2024, after Bank of Canada decision

The Bank of Canada held its key interest rate at five per cent, however it warned that it's still worried about the risk of inflation. One economist says although he expects cuts are coming in 2024, nothing is "preordained."

"This will be the year of cuts," David Macdonald, a senior economist at the Canadian Centre for Policy Alternatives, told CTV News Channel on Wednesday. "The question is, when do they start and how quickly do they proceed?"

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Macdonald also cautioned that growth projections "remain quite low," part of an ongoing trend with Canada's "overall economic picture" – a byproduct that continues to put pressure on consumers.

"We've seen very little, almost no economic growth whatsoever last year," he told CTV News Channel host Marcia MacMillan. "There's no indication that we're going to immediately see growth at the start of this year."

When are cuts coming?

With the Bank of Canada indicating that rate cuts will be coming in 2024, Macdonald says the timing won't have been "pre-decided" and decision-makers will be examining the data, "just like everybody else."

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"This is very much a fluid situation," Macdonald explained. "They're not committing to those types of things… and I wouldn't expect them to."

Concern over wage increases

With growth projections in Canada remaining stagnant, Macdonald said he thinks that the Bank of Canada remains concerned with wage increases among workers, who are "clawing their way back from inflation."

"The Bank doesn't like that," Macdonald warned. "It does not want to see people getting raises and getting back to where they stood prior to this inflationary period."

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However, despite the expectation that wage gains will need to slow before any rate decrease, Macdonald said he also thinks that "relatively large" interest rate cuts are needed soon to avoid a recession.

"We'll see whether that happens though, in the spring."