Scotiabank believes the Bank of Canada kept rates too low for too long and now needs to play catch-up, it says in an economic forecast..The bank admitted it was an aggressive market forecast, however it said significant interest rate hikes will be necessary to get on top of Canada’s runaway inflation..The Western Standardreported on Wednesday the Canadian consumer price inflation had reached a three-decade high of 5.7%..“We think the Bank of Canada is falling farther and farther behind the curve. As a result, we now predict that it will raise its policy rate by an additional two percentage points this year, ending the year at 2.5%,” said Jean-François Perrault, Scotiabank’s chief economist since 2015..“Canadian interest rates are forecast to soar over the next few months. The bank sees the overnight rate hitting 2.5% by the end of 2022 and rising another 50 basis points in Q1 of 2023. It would be the highest overnight rate since before the Great Recession with an overnight rate at 3%. That’s an extremely sharp increase,” Canadian real estate news source, Better Dwelling, said on its website..Scotiabank agreed the Russia-Ukraine conflict is adding to the increase in global commodity pricing but pointed out the 30-year high of 5.7% predates the war by over a month..The Bank of Canada’s Business Outlook Survey for Q4 of 2021 showed Canadian businesses expect high inflation for years to come. Expectations of higher interest rates indicate businesses’ lack of confidence in the Bank of Canada’s ability to control inflation..The majority of businesses are preparing to increase workforce wages so employees can afford the rising cost of living. Such a move would solidify high inflation rates. Scotiabank now expects earlier interest rate hikes, as the Bank of Canada battles inflation and a drop in confidence..Scotiabank predicted in late 2021 interest rates would be on the rise in the new year..“In Canada, incoming data, including strong employment numbers, point to a strong expansion in the fourth quarter. On top of that, there is increasing evidence of an acceleration in wages and ensuing price increases. The Canadian Federation of Independent Business’s business barometer suggests businesses expect prices to rise 4.3% in the next year, a pace nearly 2.5 times more rapid than the average expectation over history,” Scotiabank reported on its website December 2021..In 2021, the National Bank of Canada declared 2022 would be “The year of the hike.”.“Over the next year, the overnight rate is forecast to recoup much of the ground lost during the pandemic. However, Canada’s real estate bubble will prevent it from going much further. Since the country went all-in on housing, it can’t pursue more aggressive policies like healthier economies,” Better Dwelling said..Amanda Brown is a reporter with the Western Standard.,.abrown@westernstandardonline.com
Scotiabank believes the Bank of Canada kept rates too low for too long and now needs to play catch-up, it says in an economic forecast..The bank admitted it was an aggressive market forecast, however it said significant interest rate hikes will be necessary to get on top of Canada’s runaway inflation..The Western Standardreported on Wednesday the Canadian consumer price inflation had reached a three-decade high of 5.7%..“We think the Bank of Canada is falling farther and farther behind the curve. As a result, we now predict that it will raise its policy rate by an additional two percentage points this year, ending the year at 2.5%,” said Jean-François Perrault, Scotiabank’s chief economist since 2015..“Canadian interest rates are forecast to soar over the next few months. The bank sees the overnight rate hitting 2.5% by the end of 2022 and rising another 50 basis points in Q1 of 2023. It would be the highest overnight rate since before the Great Recession with an overnight rate at 3%. That’s an extremely sharp increase,” Canadian real estate news source, Better Dwelling, said on its website..Scotiabank agreed the Russia-Ukraine conflict is adding to the increase in global commodity pricing but pointed out the 30-year high of 5.7% predates the war by over a month..The Bank of Canada’s Business Outlook Survey for Q4 of 2021 showed Canadian businesses expect high inflation for years to come. Expectations of higher interest rates indicate businesses’ lack of confidence in the Bank of Canada’s ability to control inflation..The majority of businesses are preparing to increase workforce wages so employees can afford the rising cost of living. Such a move would solidify high inflation rates. Scotiabank now expects earlier interest rate hikes, as the Bank of Canada battles inflation and a drop in confidence..Scotiabank predicted in late 2021 interest rates would be on the rise in the new year..“In Canada, incoming data, including strong employment numbers, point to a strong expansion in the fourth quarter. On top of that, there is increasing evidence of an acceleration in wages and ensuing price increases. The Canadian Federation of Independent Business’s business barometer suggests businesses expect prices to rise 4.3% in the next year, a pace nearly 2.5 times more rapid than the average expectation over history,” Scotiabank reported on its website December 2021..In 2021, the National Bank of Canada declared 2022 would be “The year of the hike.”.“Over the next year, the overnight rate is forecast to recoup much of the ground lost during the pandemic. However, Canada’s real estate bubble will prevent it from going much further. Since the country went all-in on housing, it can’t pursue more aggressive policies like healthier economies,” Better Dwelling said..Amanda Brown is a reporter with the Western Standard.,.abrown@westernstandardonline.com
