TD Economics outlines possibilities for this year
![How is the updated BoC rate likely to influence 2023 economic trends?](https://cdn-res.keymedia.com/cdn-cgi/image/w=1000,h=600,f=auto/https://cdn-res.keymedia.com/cms/images/us/074/0311_638104079565038598.jpg)
As the Bank of Canada interest rate is now at a peak of 4.5%, the economy is likely to slow down significantly with GDP expected to stall in mid-2023, according to TD Economics.
The central bank’s announcement earlier this week is shaping up to be its last rate hike for a long while, TD said.
“Heading into (January 25), the bank had communicated that it could go either way with [the latest] decision — deciding between a final hike or a pause,” TD said in a new analysis. “Given the robustness of consumer spending and employment trends, the BoC clearly felt it needed this final hike to solidify the turn in economic momentum.”
The likely deceleration this year is expected to be a consumer-led trend.
“Greater conviction in this has also led the BoC to cut its inflation forecast,” TD said. “With the belief that the economy is on the path to price stability, the BoC can now step to the sidelines and let its restrictive policy filter through the economy.”
This guarded stance will almost certainly define the central bank’s strategy this year, barring a few adjustments from unexpected swerves.
“Though [the BoC] does have the option to hike again should inflation prove uncooperative, we are expecting it to hold rates at this level for most of 2023, before cutting at the end of the year to drive a better balance between interest rates being too far in restrictive territory and a weakening economy,” TD concluded.