CoStar Group: The Bank of Canada has reached the limit of interest rate hikes and may cut interest rates by the end of 2023

Carl Gomez, chief economist at CoStar Group, said the Bank of Canada has reached its “ceiling” on interest rates and a deeper-than-expected recession next year could prompt officials to ease policy a year later.

Gomez said Canada’s current 6.9 percent annual rate of inflation is starting to slow and could approach 3 percent by late spring 2023. He said consumer spending was weak due to falling real wages and rising debt servicing costs, as suggested by recent third-quarter GDP data, and expected further weakness ahead.

Gomez believes that the full impact of the rate hike has not been fully transmitted to consumers. He sees the Bank of Canada likely to cut interest rates later next year for being too aggressive in unwinding pandemic stimulus.