Analysts say another rate hike could be on the way

The central bank’s next policy rate announcement is scheduled for July.

According to various market analysts, the existing circumstances indicate a high likelihood of another interest rate hike after June 7th.

Sherry Cooper, Chief Economist at Dominion Lending Centres, stated that the Bank of Canada’s next move will be influenced by the inflation reports and two upcoming labor market reports, which will be released between now and the central bank’s policy decision next month.

Currently, the Bank of Canada’s policy rate has reached its highest level in 22 years at 4.75%.

Cooper mentioned, “There is a good chance of another rate hike before the end of the year,” and noted that the Bank’s language suggests concerns about excess demand in the economy.

Cooper said, “If the data remains strong over the next few weeks, another 25-basis-point rate hike in July is quite likely.”

Josh Nye, Senior Economist at Royal Bank of Canada, stated that due to stronger-than-expected GDP growth in the first quarter and the unemployment rate remaining near historical lows for five consecutive months, “Data clearly needs to broadly slow to prevent another rate hike, and accurately predicting when the economy will cool has always been a challenge.”

Nye pointed out in a report, “The adjustment in Canada’s housing market appears to be over.” He stated, “We had thought the Bank might wait until July to accumulate more data and update their forecasts, but consistent with the proactive approach maintained throughout the tightening cycle, the Governing Council surprised (us as well) with a 25-basis-point hike.”

Nye highlighted the concluding statement in the Bank of Canada’s June 7th report, stating, “The statement is not explicitly hawkish, but our expectation is that if the Bank joins the action camp, they will be inclined to do more than a one-off hike.”

Nye added, “If 4.5% rates weren’t sufficiently restraining, it’s hard to imagine what difference 4.75% will make.”

Source: https://www.mpamag.com/ca/mortgage-industry/industry-trends/another-rate-hike-could-be-on-the-way-say-analysts/448811