surpassing economist expectations and marking the biggest year-over-year increase since January 1983. With gas prices having surged last month, economists say inflation could hit the 8 per cent threshold in June.pair of Bank of Canada surveys also showed that businesses and consumers anticipate high inflation to persist for longer
On top of that, employment data released by Statistics Canada on Friday showed the labour market remains tight,"The recent acceleration in wage growth and rise in long-run inflation expectations leave little doubt that, despite the drop back in commodity prices, the Bank of Canada will follow through with a larger 75 basis point interest rate hike," Stephen Brown of Capital Economics wrote in a research note.
However, Porter notes that a surprise 100 basis point hike is still unlikely, as the market has already priced in a 2.25 per cent rate and the Bank officials have said"they want to be a source of stability and predictability."Still, a 75 basis point hike will likely put further pressure on the housing market and heavily indebted Canadians.
The Canada Mortgage and Housing Corporation said in a research note released Monday that in a high interest rate scenario – where the Bank of Canada hikes interest rates to 3.5 per cent by early 2023 before gradually returning to its neutral rate of 2.5 per cent – national average house prices remain elevated but decline by 5 per cent by mid-2023. The moderate interest rate scenario – where the benchmark rate hits 2.
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