Economists expect the Bank of Canada to further taper its asset purchases when the central bank next meets on July 14.
Canada’s export-driven economy is currently forecast to grow 6.2% this year, marking the fastest annual expansion since 2007. The Bank of Canada’s latest Business Outlook Survey is at a record high, pointing to optimism for a broadening economic recovery.
And, among the Group of Seven (G7) central banks, the Bank of Canada was the first to tighten its monetary policy when it reduced its weekly asset purchases program starting in April.
Based on the brightening outlook, economists polled by the Reuters news agency say that they expect Canada’s central bank to further taper its asset purchases again at its July 14 meeting, with consensus expectations calling for a reduction of between $1 billion to $2 billion per week. Reuters polled 21 Canadian economists for the survey.
Canada’s inflation rate is expected to remain above the mid-point of the central bank’s target of 1% to 3% in each quarter of 2021, averaging 2.7% this year and 2.2% next year (2022).
Nearly 80% of economists who responded to a separate question said that the Bank of Canada would raise rates before the U.S. Federal Reserve, which is set to taper its asset purchases as soon as this year, according to the minutes of its June policy meeting, which were released earlier this week.
The latest Reuters poll found that economists expect the Bank of Canada to raise its key interest rate by 25 basis points to 0.50% in the final quarter of next year. A slightly higher number of economists are now predicting that an interest rate hike could come as early as the third quarter of 2022.
