BoC Preview: Forecasts from six major banks, hawkish hike

The Bank of Canada (BoC) is set to announce its interest rate decision on Wednesday, May 1 at 14:00 GMT and as we get closer to the release time, here are the expectations as forecast by the economists and researchers of six major banks, regarding the upcoming announcement. 

The BoC is set to deliver another 50-basis point hike raising the Overnight Rate to 1.50% with a hawkish policy statement. 

TDS

“We look for the BoC to deliver another 50bp hike in June to bring the overnight rate to 1.50%. With little uncertainty around the decision itself, the focus will shift to the policy statement where we expect a hawkish tone. The Bank will note that growth and inflation are both tracking above the April MPR, and repeat that rates will need to rise further. Global factors remain a crucial driver of the loonie, likely limiting the impact of the BoC's anticipated 50bp rate hike. As a result, we expect USD/CAD to maintain the 1.26-1.30 range through the summer months but will look to fade extremes.”

ING

“A strong economy, booming jobs market, and elevated inflation argue for another ‘forceful’ 50bp hike. And the BoC is unlikely to stop there, with a red hot housing market and support from rising commodity prices suggesting it may be even more aggressive than the Fed this year. We expect CAD to benefit from BoC tightening in the medium-term.”

RBC Economics

“The overnight interest rate is widely expected to rise by another 50 bps to 1.5% as the BoC continues its efforts to fight inflation. The hike will build on the BoC’s 50 bp increase in April and 25 bp rise in March – with more increases likely in the months ahead.”

NBF

“The BoC is widely expected to follow April’s 50 basis point rate hike – which was the first in over twenty years – with another half-percentage-point hike, bringing the overnight target to 1.5%. With the announcement of QT already behind us and now underway, the focus will remain squarely on the Bank’s guidance for its key interest rate. For now, the BoC appears set to quickly move towards its 2-3% neutral range (implying a third straight 50 bp move in July) but thereafter, the outlook is murkier. That said, we don’t expect the Bank to show its cards on Wednesday. Instead, look for the Governing Council to retain flexibility.”

CIBC

“The BoC will have to sound hawkish. After all, non-standard 50bp hikes don’t happen every day, particularly back-to-back. Moreover, inflation has continued to surprise to the upside. However, any admission that the housing market is already responding to higher interest rates should also be seen as an admission that excess demand is about to become less excessive. That is one of the key reasons why we think that, after another 50bp hike in July, the pace of hikes will slow down, and the Bank won’t need to take rates any higher than the 2.5% mid-point of its neutral band to achieve 2% inflation sometime in 2023.”

Citibank

“We expect a 50bp rate hike from the BoC taking the policy rate to 1.5%.”