Rates Will Still Rise, But Slower—Say Analysts


interest-rate-news Major economists expect Canada’s overnight rate to rise to 1.25% by year end—according to a Bloomberg survey. That’s down from a May projection of 1.50%.

(The overnight rate is currently 0.50%. This rate impacts prime rate, which—in turn—impacts variable mortgage rates.)

Here’s a summary of what the Big 5 banks are saying about interest rates now. The consensus still seems to suggest a 1/4 point rate increase at the next July 20 Bank of Canada meeting.

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  • BMO:
    • “Assuming financial markets don’t seize up, we
      expect a 25 bps rate hike in July, though recent economic softness and uncertainty point to a pause in September.” [Source]
    • “That buzz you hear about a possible double-dip recession is legitimate and will remain a worry for markets the rest of the summer and into the fall.” [Source]
    • BMO’s forecast suggests a 50 basis point hike in prime rate by year end. [Source]
  • CIBC:
    • The flight to safety bid in bonds will fade if there are no significant outright sovereign defaults. (If right, this portends higher bond yields to come. – CMT) [Source]
    • CIBC feels the BoC will move the overnight target “higher by two or three more quarter point steps.  Thereafter, the Bank is likely to stay on hold until US conditions…are healthy enough for the Fed to be close to hiking.” [Source]
  • RBC:
    • “We look for the Bank to increase interest rates gradually as it becomes increasingly apparent that ultra-low interest rates are no longer required to support growth.” [Source]
  • Scotia:
    • Scotia suggests a 75 basis point hike in prime rate by year end. [Source]
    • “The Canadian economy is so highly integrated into global trade and capital markets that it is unlikely that we can significantly outperform other countries.” [Source]
    • Problems in Europe and the U.S. “probably won’t trigger the dreaded ‘double dip’ (recession).” [Source]
  • TD:
    • “Despite the significant slowdown in economic activity in April, we expect the recovery in Canada to remain on track.” [Source]
Source: Canadian Mortgage Trends

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