Bank of Canada Seen Raising Interest Rates Two More Times In 2018: Poll

Economists expect the Bank of Canada to raise interest rates two more times this year, according to the results of a new poll conducted by Reuters.

Economists surveyed said that they expect two more rate increases in 2018 as Canada’s central bank tries to strike a balance between a stronger economy and a number of economic risks, including trade negotiations and new housing regulations.

The central bank has raised interest rates three times since last July amid a robust job market and solid economic growth. But Bank of Canada Governor Stephen Poloz has said several times that he will be cautious in considering future interest rate hikes and their impact on Canadian consumers.

To be sure, there are many unknowns for the central bank to be cautious about, particularly the uncertain fate of the North American Free Trade Agreement (NAFTA) as negotiators convene for a seventh round of talks in Mexico City this week.

The 30 analysts polled by Reuters unanimously forecast the central bank will hold its benchmark rate at 1.25% at its next announcement on March 7. From there, the median forecast is for a hike in the second quarter and another increase in the fourth quarter, which will bring rates to 1.75% by the end of the year.

While the second-quarter hike is a quarter sooner than anticipated in the last Reuters poll conducted in January, it still leaves rates at the same level that was expected for 2018. Analysts expect rates to go to 2% in the first quarter of 2019. Markets see an 80% probability the Bank of Canada will raise rates in May of this year, while a hike is fully priced in for this July.