By Paul Vieira


OTTAWA--The Bank of Canada is expected to embark on a prolonged series of rate cuts, starting this June and ending in late 2025 with the country's main interest rate two percentage points lower than its current level, according to a central bank survey released Monday.

The Bank of Canada's quarterly survey, conducted in early March, is based on responses from about 30 financial-market participants on questions regarding the economy and monetary policy. The consensus toward rate cuts starting in June comes as inflation in Canada has remained under 3% for three straight months, or the upper range of the central bank's 1% to 3% inflation-target range. Bank of Canada Gov. Tiff Macklem said last week the development is another sign that upward price pressures are abating and returning "closer to normal."

The Bank of Canada sets interest-rate policy to achieve and maintain 2% inflation.

Still, Macklem said central-bank officials wanted to review additional data emerging this month and next to check whether the downward momentum can be sustained before issuing its next policy-rate decision, on June 5. Macklem said this month, while maintaining the target for the overnight rate unchanged at 5%, that a rate cut in June was within "the realm of possibilities."

The median from 27 responses via market participants indicated the first Bank of Canada rate cut would come in June, to 4.75%. By December, a median of 27 responses had the Bank of Canada's policy rate down further to 4%; and by the end of 2025, a median of 25 responses expect the benchmark rate to hit 3%, or two percentage points lower than its present level.

In other questions, market participants said - based on median responses - that the Canadian economy would expand 1% in 2024, and inflation would slow to 2.3% by the end of the year. Survey respondents added they expect the yield on the two-year government of Canada bond to fall from its current 4.26% level to 3.50% by December.


Write to Paul Vieira at paul.vieira@wsj.com


(END) Dow Jones Newswires

04-22-24 1140ET