Market participants expect the Bank of Canada to begin cutting interest rates in April, new survey results from the central bank show.

The quarterly questionnaire was provided to about 30 financial market players. In its latest monetary policy decision, the BoC held its key overnight lending rate at 5%, which marks at 22-year-high.

While holding the rate, BoC officials shifted their tone on possible additional rate hikes. Tiff Macklem, the BoC’s governor, indicated that rate cuts are a matter of when, not if.

The market participant survey was conducted from December 18 to 29. The experts anticipate a full 1% cut to 4% by year-end 2024 and a further 1% reduction to 3% by year-end 2025.

Some lenders are already offering mortgages at rates below 5%.

However, Benjamin Tal, CIBC’s deputy chief economist has warned that the market is too eager for rate cuts.

The BoC’s widely expected recent rate hold came after the inflation rate rose to 3.4% in December after holding steady at 3.1% in November and October. The market survey on rate cuts was conducted before Statistics Canada released the December inflation figure.

The BoC has sought to bring inflation to closer to 2% before reducing interest rates. Many analysts have predicted that the BoC will introduce reductions in the second half of 2024.

Pictured: Bank of Canada Governor Tiff Macklem