The inflation rate reached 3.4% in December and is struggling to slow down. (File photo)
This decline in consumer spending is expected to further dampen the economy this year.
Manulife's economic outlook for 2024 suggests that #x27;economy will slow in the first half before resuming growth.
It will be a weak year, whether or not we face a technical recession, said Mr. Lapointe. The question will be how long will this slowdown last? And will we be able to achieve a sustainable recovery in the second half of this year?
He adds that the expected rebound in the second half depends on the drop in interest rates. #x27;interest.
The Bank of Canada should not yet start discussing rate cuts, especially since the x27;inflation increased last month.
Canada's annual inflation rate rose to 3.4% in December as underlying price pressures failed to ease . According to Mr. Lapointe, the fact that basic measures of inflation (which exclude price volatility) increased last month poses a communication problem at the central bank.
I think it's a problem for the Bank of Canada – it's also a problem for consumers – in the sense that it suggests that pricing pressures on the commodity front are more persistent than we thought. And that probably complicates their messaging next week, he said.
The Bank of Canada has already acknowledged that getting back to 2% inflation will have some bumps along the way. Governor Tiff Macklem said the central bank would not react to every setback, but rather would respond to consistent trends.
We still believe the most likely path for inflation is a lower path.
A quote from Tiff Macklem, Governor of the Bank of Canada
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Tiff Macklem, Governor of the Bank of Canada. (File photo)
Economy looks softer, monthly inflation data to rebound, but general trend is falling, said Mr. Janzen.
In addition to its announcement about the key rate, the Bank of Canada will publish its quarterly report on Wednesday on monetary policy. The report will include new forecasts for the economy and inflation.
In October, the Bank of Canada forecast that the ;inflation would fall to 2% in 2025.