A BoC policy rate of 5% is almost a certainty, bank says
By every indicator currently available, the Bank of Canada will almost certainly raise its policy rate again in its next meeting on July, according to TD Bank.
Derek Burleton, deputy chief economist at TD Bank, told BNN Bloomberg earlier this week that TD is anticipating the central bank to hike its benchmark rate to 5% in a few weeks.
“We see signs pointing toward a rate hike, and the markets are already ready for it,” Burleton said. “It’s a close call on whether the Bank of Canada will hike after that, and we’ve decided for now not to build in a follow up rate hike in September.”
Rate cuts are likely to begin only by the second quarter of 2024, TD predicted.
“It will be a gradual step-down”, Burleton said. “We know the economy will slow significantly, the question is when. We expect core inflation to be elevated for the rest of 2023, but broad inflation is sticky.”
A new Bloomberg survey of economists placed odds of a hike in the BoC’s next meeting at about 75%.
However, the poll also found a consensus expecting Canadian GDP to shrink by 0.1% annually in Q3 and by 0.2% in Q4.
Inflation is likely to clock in at 3% annualized by the end of 2023, while economists’ expectations for growth next year were cranked down to 0.7%.
