The Bank of Canada will raise interest rates by the end of the third quarter next year, according to nearly all economists polled by Reuters, with a growing minority expecting a first hike as early as end-June.
Over 95 per cent of economists, 26 of 27, expected at least one hike by the end of the third quarter of 2022, the Nov. 29-Dec. 3 Reuters poll found.
That is much more conclusive than a poll in October when economists were split over the chances of a Q3 hike. Now 19 of 20 common contributors expect at least one rise by end-September compared with 11 in October’s poll.
All 29 contributors expected the Bank of Canada to keep rates unchanged at 0.25 per cent at its Dec. 8 meeting.
“The Bank of Canada will raise rates in the third quarter of 2022…the elevated rate of inflation is putting pressure on the Bank of Canada and the Fed, but there is a hesitance to raise rates and risk stunting the recovery,” said Brendan LaCerda, senior economist at Moody’s Analytics.
“As such, early 2022 is the critical juncture. If all goes to plan and inflation cools, then the pressure to act dissipates. If not, then we would expect the timeline for rate increases to shift forward significantly.”
Canada’s annual inflation, at an 18-year high , has aligned a significant minority of economists with more aggressive pricing in interest rate futures markets.
About 45 per cent of respondents, or 13 of 29, expected at least one rate hike by mid-2022, in contrast to no one expecting such a move in the October poll.