CIBC Predicts Neutral Rates Convergence by 2028 for Canada and US
CIBC Capital Markets is predicting that the neutral interest rates of Canada and the US will converge by 2028, according to Avery Shenfeld, their chief economist. This means that the 'cruising speed' for policy in both countries will be similar, neither too hot to spur inflation nor too tight to slow growth.
The neutral rate is expected to edge down in the US due to the cooling of AI-related spending and reduced immigration, which can limit long-run growth. In Canada, the neutral rate may creep up if business investment rebounds from weak levels, big projects move forward, and population trends continue to drive demand for housing and infrastructure.
This convergence is expected to change the path for central-bank rates, with CIBC forecasting a small tightening in Canada of 0.50 percentage points by late 2027. In contrast, US rates are predicted to end up below today's levels by 2028 as the Federal Reserve becomes more supportive over time.