The latest Market Participants Survey for the third quarter of 2024, conducted from September 18 to 27, gathered insights from around 30 financial market participants on Canada's economic outlook. The survey reveals varied expectations for real GDP growth, inflation, and monetary policy.
For GDP growth in Canada by the end of 2024, respondents forecast a median year-over-year percentage change of 1.5%, with expectations rising slightly to 1.9% by the end of 2025. Regarding potential risks to growth, "Stronger housing market" was identified as a top upside risk by 75% of respondents, while "Increased geopolitical risks" was noted as a downside risk by half of those surveyed.
When assessing the output gap, a significant majority (81.5%) believe there is currently a negative output gap in Canada. In terms of recession probability over various time frames, the median response indicates a likelihood ranging from 20% in the short term (0 to 6 months) to consistent probabilities of around 25% up to two years ahead.
Forecasts for annual CPI inflation suggest a median rate of 2.2% at the end of both 2024 and five years into the future. For monetary policy, projections indicate that the Bank of Canada's policy interest rate could be at a median level of 3.75% by December 2024, gradually decreasing to about 2.75% by late 2025.
Regarding financial assets, estimates for Canadian bond yields show modest increases across various maturities through to the end of next year. Additionally, oil prices are expected to stabilize at approximately US$75 per barrel by the end of both this year and next year.
This survey provides valuable insights into market participants' expectations and perceived risks related to Canada's economic trajectory over the coming years.