Canada’s cooling economy prompted country’s central bank to hold interest rates at five per cent this week, and economists say rate cuts could be possible in first few months of 2024. 
The Bank of Canada held its overnight rate on Wednesday following weaker-than-expected GDP data and slowing labour market. Signs of an overall cooldown have several economists forecasting the first rate cut to come from the bank in the first quarter of next year. 
“It seems that the Bank is confident it has done enough to gradually bring the Canadian economy back to balance. And we agree,” Randall Bartlett, senior director of Canadian economics at Desjardins, wrote in a note to clients on Wednesday. 
For now, the Bank of Canada is in a waiting game to see the impact of past hikes on economic activity, he added.
“Once the Bank’s satisfied the economy has slowed enough to support a gradual return of inflation to its two per cent target, we expect it to begin cutting interest rates. This may happen as early as the first quarter of 2024,” Bartlett wrote.
As for the magnitude and pace of the rate cuts, Capital Economics’ Stephen Brown is predicting a 50 basis point drop each quarter of next year, he told in an email on Thursday. 
“We’ve got the Bank of Canada cutting interest rates by 50 basis points in each quarter of 2024, to take the policy rate from five per cent down to three per cent,” he wrote. 
In order for the Bank to cut at this rate, there needs to be a combination of weak GDP growth, a loosening of labour market conditions and a fall in the month-over-month changes in core prices, he explained. 
“We’ve already seen evidence of the first two but core inflation pressures have remained too strong for comfort. We normally think of core inflation as a lagging indicator though, so it could be another couple of months before the Bank is confident that it is easing,” he wrote. 

Even if the central bank has decided to cut rates, it likely won't let on to the general public anytime soon, Frances Donald, chief economist and head of macro strategy, told BNN Bloomberg in a television interview on Thursday. 
“This is a Bank of Canada that is done hiking interest rates — but they can’t tell us that,” she said. 
Donald explained that even if all the economic data is pointing to a slowdown or a recession, the Bank of Canada will not signal rate cuts ahead for fear of ramping up inflation yet again. 
"Inflation expectations may rise again and housing might get inflamed," she explained. 
Donald is forecasting rate cuts in the first quarter of 2024 but she is adamant that this won't be communicated by the bank. 
“They won’t tell us they’re done (hiking rates) until they absolutely have to," she said. 

At a Thursday news conference, Bank of Canada Governor Tiff Macklem said it’s too early to start talking about interest rate cuts and stressed that rates could go up again, if necessary.