Bank of Canada expected to hike rate Wednesday to stem energy inflation spillover
TLT•The Bank of Canada is expected to raise its benchmark rate by 25 basis points to 2.50% on Wednesday to curb the risk that energy inflation spreads through the economy. Nineteen of 34 economists polled forecast a hike, and the bank is expected to substantially revise its inflation forecast.
1. Rate hike expected
The Bank of Canada will likely raise its benchmark interest rate by 25 basis points on Wednesday as a pre-emptive move to keep energy-led inflation from spreading to the rest of the economy. A hike would be the first since July 2023 and would take the overnight rate to 2.50%.
2. Inflation and growth
Annual inflation rose to 3.1% in September, driven almost entirely by energy, while core measures eased below 2%. Recent data on housing, manufacturing and wholesale trade point to third-quarter growth likely being substantially lower than in the second quarter, and the last two job reports were weak.
3. Policy report due
Money markets priced in a quarter-point increase, and 19 of 34 economists surveyed on October 21–23 forecast a hike; a majority also expected one more rise before March. The bank will release its quarterly Monetary Policy Report with an inflation forecast for the coming year expected to be substantially revised.
