A majority of economists polled by the Reuters News Agency say they expect the Bank of Canada to raise interest rates by 25-basis points at its next policy meeting on July 12.
If the forecast is correct, Canada’s central bank will lift its trendsetting overnight interest rate to 5.00%, its highest level in 22 years.
Economists who were surveyed said they expect the July rate increase to be the last one by the Bank of Canada, but that interest rates are likely to be held at that elevated level well into 2024.
The new forecast is different than previous ones. Economists had earlier this year expected the Bank of Canada’s key interest rate to peak at 4.50%.
The latest data from Statistics Canada showed that annualized inflation fell sharply to 3.4% in May from 4.4% in April of this year, though it remains above the central bank's 2% target.
Economists don’t expect inflation to fall back to the Bank of Canada’s 2% goal until early 2025.
In all, 20 of 24 economists surveyed said they expect a 25-basis point rate hike on July 12, and that the overnight rate will peak at 5%.
Economists’ expectations differ from financial markets, which are currently pricing in a 55% chance for a 25-basis point rate hike in July.
