Another interest rate hike likely in October: BMO

Bank forecasts one overnight rate increase in the fall and a further two in 2019

Following a 0.25-percentage-point hike to the Bank of Canada’s overnight rate in July, economists at BMO are calling for another in October – or possibly September, if upcoming economic data is strong.

BMO said in a report published this week, “While uncertainty continues to cloud the outlook for the Canadian economy, a near-month-long run of solid data has another hike priced in by October (consistent with our call), with some even calling for a September hike… We’re not entirely ruling out a September hike at this point, but it would take a very strong run of data over the next month. Keys to watch are the July jobs report, Governor Poloz’s speech on August 25, and Q2 GDP on August 30.”

article continues below

The report backs recent predictions by RBC Economics, which also forecast a rate hike in October.

BMO chief economist Douglas Porter said in a recent note that the rise in interest rates is starting to affect Canada’s housing market.

“There are growing signs that past rate moves are starting to bite,” he wrote. “The early return for July home sales suggests that activity is still moderating in much of the country from the 1-2 hit of rising mortgage rates and a tighter regulatory backdrop.”

The bank also predicted more interest rate hikes in 2019. Its August 7 report added, “We expect two rate hikes next year and for the Bank [of Canada] to only hit the bottom of its 2.5-per-cent-to-3.5-per-cent estimated neutral range in 2020.”

Read Related Topics

© Copyright Times Colonist
Click here to take part in our readers survey


NOTE: To post a comment you must have an account with at least one of the following services: Disqus, Facebook, Twitter, Google+ You may then login using your account credentials for that service. If you do not already have an account you may register a new profile with Disqus by first clicking the "Post as" button and then the link: "Don't have one? Register a new profile".

The Times Colonist welcomes your opinions and comments. We do not allow personal attacks, offensive language or unsubstantiated allegations. We reserve the right to edit comments for length, style, legality and taste and reproduce them in print, electronic or otherwise. For further information, please contact the editor or publisher, or see our Terms and Conditions.

comments powered by Disqus

Popular Real Estate

Most Popular