The results of the second-quarter 2024 Market Participants Survey, conducted from June 19 to 28, are based on questionnaire responses from approximately 30 financial market participants. The survey offers insights into various economic forecasts and perceptions.
**Economic Scenario**
Participants were asked to forecast real GDP growth in Canada for the years 2024 and 2025. For the end of 2024, the median response was a 1.4% year-over-year increase, while for the end of 2025, it was a 2.0% increase.
When queried about the probability of GDP growth falling within specific ranges, respondents provided an average probability distribution. For instance, at the end of 2024, there was a 38.7% probability that GDP growth would be between 1.01% and 2.00%.
Regarding upside risks to their growth outlook for Canada, "strong housing market" (68%), "looser monetary policy" (56%), and "higher commodity prices" (44%) were identified as top factors.
Conversely, downside risks included a "weaker housing market" (60%), "increased geopolitical risks" (48%), and a "decrease in purchasing power" (40%).
In assessing the current level of Canadian GDP relative to potential output, 79.2% of respondents characterized it as having a negative output gap.
The probability of a recession within various time frames was also evaluated. The median responses indicated a 22.5% chance within six months and a rising probability over longer periods.
**Inflation Forecast**
For annual total CPI inflation in Canada, the median forecast for the end of both 2024 and 2025 stood at around 2.3%. Probabilities assigned to different inflation ranges suggested that there is more than a 50% chance inflation will fall between 2.01% and 3.00%.
**Monetary Policy**
Respondents projected that the Bank of Canada's policy interest rate would remain relatively stable throughout most of 2024 but might see gradual decreases starting from December onward into early 2025.
Opinions on the balance of risks around this forecast varied; while some saw risks skewed towards higher rates (40%), others believed they were broadly balanced (40%).
The peak level for the policy rate in this cycle was consistently estimated at around 5%, with long-term nominal neutral rates ranging from a median response of approximately 2.75%.
**Financial Assets**
Point estimates for various financial assets by survey participants include:
- By end-2024:
- Two-year Canadian bond yield: Median at 3.50%
- Ten-year Canadian bond yield: Median at 3.32%
- Oil price per barrel (West Texas Intermediate): Median at US$80
- Canadian dollar exchange rate: Median at US$0.74
- By end-2025:
- Two-year Canadian bond yield: Median at approximately 3.10%
- Ten-year Canadian bond yield: Median at approximately 3.35%
- Oil price per barrel: Median remains around US$78
- Canadian dollar exchange rate slightly increases to US$0.75