The Bank of Canada’s announcement of raising its overnight rate by .25%, taking it to 4.75%, is still reverberating in financial corridors, but some economists are already predicting another rate increase in July..“There were conflicting predictions about what the bank would do on June 7, with Scotiabank, for example, predicting the .25%, while Desjardins anticipated a continued pause on rate increases,” reports Storeys..More conflicting predictions on the bank’s intentions on July 12 popped up, with Randall Bartlett, senior director of Canadian Economics at Desjardins, saying he expects there will be yet another .25% increase next month as inflation remains sticky..“The Bank of Canada may not be done yet, as there is little evidence the economic indicators the bank is monitoring are meaningfully losing momentum,” Bartlett wrote in an economic update..Derek Holt, vice-president and Head of Capital Markets Economics at Scotiabank, says in his view, the door is “wide open” for another 25-bps increase next month, although it will be a data-dependent call. .Josh Nye, a senior economist at RBC, points to the conclusion of the bank’s statement..“The concluding statement doesn’t include a clear tightening bias, but our expectation has been if the bank was coming off the sidelines, they would intend to hike more than once,” wrote Nye in a note..“If 4.5% wasn’t restrictive enough, it’s hard to think 4.75% is. Governing council laid out its now-familiar criteria for future policy decisions: the evolution of excess demand, inflation expectations, wage growth and corporate pricing behaviour.”.James Orlando, CFA, director and senior economist at TD, expects another .25% rate hike in July..“With robust employment gains and inflationary wage increases allowing Canadians to keep spending in spite of high interest rates, and a massive resurgence in the real estate market brought on by the temporary pause in rate hikes, the bank is back in hiking mode," Orlando wrote in an economic report..Nye says in the period between now and July 12, there are many economic indicators the bank will be watching closely..“The period is packed with key releases including two employment reports, another CPI reading, an updated April GDP estimate and May flash, and the Q2 Business Outlook Survey,” he says..“The onus is clearly on that data to soften broadly to preclude another rate hike, and timing a slowdown has been challenging.”
