The BoC governor previously indicated that the central bank is prepared to act "more forcefully"
The United States Federal Reserve’s 0.75% rate hike on June 15, which was its largest in 28 years, has increased the odds of the Bank of Canada making a similar move in its next policy rate announcement on July 13, according to economists polled by The Canadian Press.
Such a move would build on the BoC’s two outsized 0.5% hikes this year, which is not out of the realm of possibility as governor Tiff Macklem has already indicated that the central bank is ready and willing to act “more forcefully.”
Avery Shenfeld and Andrew Grantham of CIBC said that there’s a good likelihood of the BoC instituting a 0.75% hike next month, and pegged the rate to reach as high as 2.75% by the end of 2022.
Josh Nye, of RBC Economics, said that the Fed’s decision cleared out any hesitation that the BoC might have had. He is anticipating rate hikes for the next two BoC meetings.
“One of the top arguments against the bank acting more aggressively was just that the Fed wasn't expected to be that aggressive because before this week the Fed had taken those larger hikes off the table,” Nye said.
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“If that was generally seen as reducing the odds that the Bank of Canada would do a larger hike, with the Fed now moving more aggressively with 75 basis points, I think that really increases the odds that the Bank of Canada does the same,” Nye added.
Nye also projected the BoC rate to reach 2.75% this year, and possibly even up to 3% should inflation not slow down.
