The Bank of Canada is set to raise its overnight rate by a hefty 75 basis points this month and by another 50 in September, front-loading a campaign to take monetary policy to where it will restrain the economy, according to a Reuters poll of 29 economists.
For now, the central bank is keeping up with aggressive moves by the U.S. Federal Reserve, which is also attempting to rein in inflation running at a four-decade high.
The BoC will hike again by 50 basis points in September, according to a significant majority of economists, taking the overnight rate to 2.75%. That is well into a neutral range - where the economy is neither stimulated nor restricted by policy - estimated at 2-3% by economists in the poll. "Household leverage makes it unlikely that the Bank will be able to move as far as the Fed," he added.Inflation was expected to cool significantly from a near 40-year high of 7.7% in May to 2.2% by the fourth quarter of next year, according to the poll, as recession risks rise.The survey showed a median 35% chance of recession within a year, rising to 40% over the next two years.
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