If you are just tuning in to our 3-part series on the direction of interest rates in 2024 and beyond, take a moment to glance through our first two posts, which delve into historical contexts, current circumstances, and potential obstacles in the way.
Summing it all up…
So, what does all this mean for the average investor? At the risk of adding another wrong outlook to the pile, while growth and continued inflation will rule out a return to near-0% interest rates, the path ahead appears less uncertain than during the pandemic. The imposed rate hikes are now finally slowing down the economy, discouraging spending and making loans more expensive. The result is inflation has cooled to 3.1% in October, down from a peak of 8.1% in June 2022.
The hiking cycle appears over, with the clock ticking to the first move lower.
It’s likely we’ll see the first decrease arrive in 2024 but those predicting rapid, multiple cuts appear optimistic given the economic resilience still on show. The distinct pressures faced by indebted Canadians mean this higher-for-longer rates and inflation scenario carries more risk than in the US, but the reality is this is the new normal. Work with your advisor to discuss how this might affect your financial plan and investment strategy.