More Canadians to feel pinch of high rates in 2024, making way for lower inflation

The Bank of Canada's hefty rate hikes are finally bearing fruit, as higher borrowing costs have caused a pullback in business investment and consumer spending, making way for lower inflation in 2024.

As another inflation-fighting year wraps up, the Bank of Canada's quest to restore price stability is expected to begin drawing to a close in 2024.

The central bank's hefty rate hikes are finally bearing fruit, allowing it to hold its key interest rate steady at five per cent over the last few months.

Higher borrowing costs have caused a pullback in business investment and consumer spending, making way for lower inflation.

The economic slowdown is expected to lay the groundwork for interest rate cuts as early as mid-2024, which would signal a turning point in the fight against inflation.

Desjardins' chief economist says although the central bank's rate hikes have helped get a handle on inflation, a lot of the slowdown in price growth has also come from global price pressures easing.

"We're looking at inflation 3.1 per cent, now much less stressful than it was a year ago," said Jimmy Jean, chief economist at Desjardins.

"And, part of it, I think, is yes, the actions the bank has taken. But another part is also things that were expected to (resolve) in their own right."