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Many Bay Street analysts expect the Bank of Canada will cut interest rates later this year as inflation cools and economic growth stalls, according to a survey published for the first time by the bank on Monday.

The survey of 28 financial-market participants – economists and strategists at banks, pension funds and asset-management firms – was conducted in the last two weeks of December. The publication of the survey results is part of a broader effort by the central bank to increase transparency.

The median respondent expects the central bank to cut interest rates by a quarter of a percentage point in October and again in December. That would bring the bank’s benchmark interest rate to 4 per cent.

The central bank increased its policy rate to 4.5 per cent on Jan. 25, and said that it does not expect to keep raising interest rates. Governor Tiff Macklem said this was a “conditional pause,” and that it was “far too early to be talking about cuts.” He said the bank could still raise rates if inflation proves more stubborn than expected.

The survey captures how Bay Street analysts are feeling at a pivotal moment for monetary policy. After raising rates eight consecutive times since last March, most analysts believe the central bank has gone far enough in its fight against inflation. Even the more hawkish survey respondents expect the central bank’s policy rate will remain at 4.5 per cent, before falling next year.

Analysts appear largely aligned with the Bank of Canada’s downbeat outlook for the Canadian economy, as well as its relatively optimistic assessment of the trajectory for inflation.

Nearly half of the respondents expect GDP growth to be negative in the fourth quarter of this year. The median response put the odds of a recession in the next six to 12 months at 50 per cent.

The Bank of Canada expects the economy to “stall” through the first half of 2023, and produce only 1-per-cent GDP growth this year.

“It’s just as likely that we’ll have two or three quarters of slightly negative growth as slightly positive growth,” Mr. Macklem said in a news conference on Jan. 25, after announcing a quarter-point rate hike. “So, yes, it could be a mild recession. It’s not a major contraction.”

On a more positive note, respondents expect the rate of inflation to continue slowing. The median respondent expects the annual rate of consumer price index inflation to be 2.9 per cent in the fourth quarter of 2023. That’s slightly above the Bank of Canada’s latest estimate, published two weeks ago, which sees CPI inflation averaging 2.5 per cent in the fourth quarter. The bank targets 2-per-cent annual inflation.

Inflation has been trending down since last summer, hitting an annual rate of 6.3 per cent in December, from a peak of 8.1 per cent in June. Much of this drop has come from lower oil prices, as well as falling prices for some durable goods. Economists expect inflation to continue decelerating in the coming months as higher interest rates squeeze consumer spending and unemployment starts to rise.

As part of its transparency efforts, the bank will publish for the first time on Wednesday a summary of the deliberations that went into its latest rate decision. The summary is not expected to be as detailed as meeting minutes published by the U.S. Federal Reserve after interest-rate decisions. But it should offer insight into how the Bank of Canada’s governing council sees inflation and the economy evolving, and whether Mr. Macklem and his team considered alternatives to the quarter-point rate increase they delivered on Jan. 25.

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