Hey remember this guy? – How to score when the goal posts won’t stay still.
We wanted to take a beat and wait for the Big 5 economists to weigh in on the Bank of Canada’s most recent 1.00% increase. They must be as surprised as we were because they have not yet updated their analysis to reflect the higher than expected rate increase.
Any of you currently on a variable mortgage will by now be feeling the effects of the Bank of Canada’s aggressive rate increases. Although analysts were predicting a 0.75% rate increase last week, the BoC made real waves by increasing a full percentage point.
As always, the question is how high can they go without putting the Canadian families and the housing market at large into dire straits? If you clicked the link above, you’ll understand why we might be forgiven for getting out of the prediction game. So as always, we’ll defer to the real pros.
Both CIBC and Scotia Bank are forecasting the BoC needing to increase their rate another 0.50% before getting inflation under control. In both cases they predict this will be achieved by December 2022. TD Bank is going further, predicting the BoC to increase another 1.00% before the end of this year. Yesterday we sat in on a webinar with the BoC Governor General Tiff Macklem (the funny guy in the clip linked above), and the messaging from the BoC is that they remain confident they can increase rates at their current pace without plunging Canada into a recession; they’re calling it a “soft landing”. RBC, The Canadian Center for Policy Alternatives and others are not so optimistic, predicting at least a mild recession by early 2023.
We’ll be sure to share an update once we start seeing more analyses and reactions from the big banks.