“We’re going to have two percent [inflation] in the Bank of Canada’s sights,” said Dawn Desjardins. “That will open the door for them to start to give some interest rate relief.”

Canada’s inflation rate is still much below the Bank of Canada’s two percent objective, but it is decreasing. The consumer price index fell to 3.1 percent year on year in October, down from 3.8 percent the previous month.

Meanwhile, the economy remains poor as we approach the end of 2023. Real GDP fell by 0.3 percent in the third quarter and by 1.1 percent year on year.

Desjardins expects these trends to continue in the coming year. The Bank of Canada will thereafter be able to cut interest rates. “A lot of things are sort of in train,” she says. “We see that the inflation pressures have eased considerably.”

She also stated that people and companies expect the central bank to successfully restore inflation to 2%. “We’re going to get over this hump,” Desjardins promised. “This provides some support for households.”

Desjardins also stated that Canada is currently in a slight recession. She expects that 2024 will start slowly, but that the economy will gather up speed over the year.

The unemployment rate, which is currently at 5.7 percent, is expected to rise above six percent as a result of Canada’s high population growth, but she predicts no significant weakness in the labor market.

“We’re not looking for wholesale job losses,” Desjardins added. “That’s one of the mitigating factors for the economy.”

She went on to say that employers will be more likely to keep their current employees after the “significant trauma” of the pandemic and the reopening of the economy.

According to Desjardins, companies that are currently under tremendous pressure from rising wages and interest rates may be able to negotiate lower levels of salary increase in the coming year.

“If we as workers are beginning to see some fraying in the job market, we will likely be less active when negotiating our pay.” Desjardins expects the economy to return to positive growth before the end of 2024 if the labor market remains stable. “We have a very low growth rate overall in 2024 but I think the pattern is going to be more encouraging,” she went on to say.

Desjardins emphasized that the Bank of Canada would be careful so that inflationary pressures do not resurface before we achieve a steady two percent inflation rate.

“If they ease too early or too much, it could just reignite a cycle that puts upward pressure back on the inflation rate,” she told reporters. “That’s one thing that they do want to avoid.”