GDP contracted in the third quarter and there are downside risks to the outlook. As house prices are falling again, household debt is elevated and high interest rates are still feeding through, the key risk is that the mild recession we forecast could morph into a deeper downturn. Soft GDP growth and a rise in the unemployment rate will at least help to ease inflationary pressures, with headline CPI inflation falling back to the 2.0% target in the third quarter of 2024. That will allow the Bank of Canada to cut its policy rate to 3.0% next year, leaving it well below market expectations.
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