Former BoC governor predicts interest rates around 3% by 2026

Following the Bank of Canada’s recent decision to cut interest rates, a former Bank of Canada governor predicts interest rates to settle around three per cent over the coming years.

Last week Canada’s central bank moved to lower its benchmark policy rate by 25 basis points to 4.75 per cent while signalling further cuts. The move came as Bank of Canada officials said they have a higher degree of confidence that inflation is trending toward the central bank’s two per cent target. 

In an interview with BNN Bloomberg on Friday, David Dodge, a senior advisor at Bennett Jones and former Bank of Canada governor, said the move makes “good sense” and the timing of future cuts will depend on “the continued progress on inflation.” 

“Nevertheless, we think we'll be by 2026 pretty close to (a) two per cent (inflation rate) and so we ought to be back to a Bank of Canada policy rate that is close to neutral. And the new neutral is higher than the old one,” Dodge said.