TD expects next rate rise in the spring

by Steve Randall05 Dec 2018

With an interest rate hike today (Dec 5) dismissed by most economists, there is debate over the timing of the Bank of Canada’s next increase.

Some are calling for a January 9 increase to 2% with perhaps two more hikes through 2019, while others are expecting a more cautious pace from Governor Poloz especially given more recent economic developments.

TD Economics’ chief economist Beata Caranci and senior economist James Orlando are among those expecting a pause until the spring.

In a Market Insight published Tuesday, the economists point to their tracking of fourth quarter GDP which appears weaker than the BoC’s 2.4% forecast by a whole percentage point.

Also in the mix is the oil industry with Alberta’s production cuts unlikely to prompt an end to heavily discounted prices; and downside risks from slowing global trade momentum, commodity prices, and trade tensions.

“We think two rate hikes are on the docket for 2019, which is a downgrade from our prior view of three hikes in light of the recent domestic risks that have emerged and some unexpected weakening in economic momentum,” the TD Economics economists conclude.


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