Sept 24 (The Street Press) – Canadian Prime Minister Justin Trudeau believes that interest rates will begin to decrease around the middle of next year. This matches what a recent Reuters poll suggested, even though the latest economic information has made the central bank more cautious about raising rates.
“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 shared in an interview with the New York Times, conducted just before his return to Canada following his participation in the United Nations General Assembly.
Trudeau’s popularity in opinion polls has declined as Canadians grapple with a cost-of-living crisis triggered by the central bank’s rapid interest rate hikes aimed at curbing inflation.
Although inflation has moderated since its peak, the August Consumer Price Index (CPI) registered at 4%, surpassing the central bank’s 2% target. Bank of Canada Governor Tiff Macklem even suggested that rates might not be sufficiently high.
In a survey conducted from August 24th to 30th, a majority of economists, 24 out of 34, anticipate that the Bank of Canada will maintain its policy rate at the current level of 5% or higher until at least the end of March 2024. The median prediction indicates a reduction of 50 basis points by the end of June next year, aligning with expectations for the U.S. Federal Reserve.
Trudeau has entered a delicate discussion on monetary policy, and previous remarks from his government and provincial politicians regarding interest rates have raised concerns about the central bank’s independence.
Earlier this month, Finance Minister Chrystia Freeland had to clarify her stance, affirming the Bank of Canada’s independence. This clarification came after her statement that the central bank’s decision to maintain the interest rate “is welcome relief for Canadians” had sparked doubts about the bank’s autonomy.
The Prime Minister’s Office chose not to provide a comment on Trudeau’s statement when approached on Saturday.
Conservative Party Leader Pierre Poilievre has attributed the inflation and affordability challenges to the Trudeau government’s substantial pandemic-related spending.
Trudeau acknowledged the public’s concerns, stated that people are frustrated with the government because things aren’t going as smoothly as they’d like, and people are feeling anxious. So, yes, it’s a challenging period.