US economic growth continues to surprise to the upside. Fourth quarter GDP came in at 3.3%, considerably better than the 2% expected. It's a good thing to because China, Europe and places like Canada are not contributing much to global economic growth. China, who not long ago was predicted to overtake the US economy this decade, appears to be in a deflationary environment. For those unfamiliar with deflation, it is just as bad as high inflation to the economy.

 

Because global growth has not been good in many countries we've already seen bank governors around the world cutting rates. And many G-7 countries are now expected to cut significantly in 2024. As you can see from the chart below the US Federal Reserve is expected to start cutting rates in June with anywhere from 1 to 1.5% cuts by the end of the year. If one of the best economies in the world [US] is planning to cut rates that much then we can only assume that the rest of the G-7 will cut by at least least that much or more.

 

Canada's economy is not nearly as strong as the US which logically makes me think that Canada cut rates sooner and more aggressively than the US. For those of you out there who have a variable rate mortgages, 2024 should provide some interest rate relief!

Source: Charlie Bilello

 

I've also included a piece from our CIBC Economics team entitled "Mick Jagger Monetary Policy”.

 

As always, if you have any questions, please feel free to give us a call at any time.

 

Have a great weekend.

 

Milan