Rate hike likely this month but then a pause?

by Steve Randall02 Jul 2018

The Bank of Canada will meet to decide on its latest move on interest rates next week and many are expecting an increase.

But once July’s hike is done, things become less clear as the economy is showing some mixed signals.

Two economists from Canada’s big banks have given their assessment of the likelihood of rate rises and both are confident that homeowners are facing higher mortgage costs from this month.

CIBC’s Avery Shenfeld says that the recent GDP and outlook survey were positive and a strong labour force survey for June is also expected.

“That will be the last piece of the puzzle for a Bank of Canada rate hike in July, but we’re also of the view that economic growth will moderate enough after Q2 to force another extended pause on rates,” he says.

Meanwhile, TD Economic’s James Marple is also expecting June’s labour figures to support a July interest rate rise; and concurs with Shenfeld’s call for a pause afterwards.

“Given a more cautious outlook and ongoing threat of escalating trade wars, we suspect it will be some time before we see another hike,” he says.

Marple notes that the housing market has shown some signs of stabilization with  some markets, Ottawa and Montreal for example, showing “decent positive momentum.”


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