The Bank of Canada will raise interest rates again in July to 5.00% after a surprise 25 basis point increase last week, according to economists polled by Reuters, who unanimously said the main risk was the central bank might have to do more.
In the run-up to the BoC's shock move on June 7, most economists said there would be no further hikes this year, underscoring a sharp turnaround in sentiment rooted in widespread concerns inflation is not coming down fast enough.last week, the BoC noted "monetary policy was not sufficiently restrictive" and showed concerns inflation "could get stuck materially above the 2% target.
"When you resume hiking, you don't resume for one 25 basis point hike. Otherwise, it's better to do nothing," said Sebastien Lavoie at Laurentian Bank, one of the few economists who correctly predicted a hike last week. All but three of 25 economists forecast the overnight rate to peak at 5.00% or higher, 50 basis points more than was predicted in the last survey published on June 2.
"At the core, the view is that the labour market is still very tight, and now even the housing market is starting to improve... that really does raise questions whether policy is tight enough at this point," said Doug Porter, chief economist at BMO Capital Markets.House prices, a major component of the inflation basket, have already started rising again and are
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