The latest survey findings among Reuters economists show the Bank of Canada is expected to raise interest rates in the third quarter of next year, which is at least three months earlier than previously expected.
The change of view, based on growing inflationary pressures due to global supply chain constraints, labor shortages and rising energy costs.
According to James Knightley, head of international economics at ING. continuing global inflationary pressures, recovering economic activity, a rising job market could lead to earlier policy tightening in the coming year.
The view is in line with the central bank’s latest Business Survey, which reported companies anticipate higher demand amid the waning Covid-19 pandemic. But supply constraints continue to limit sales and drive up costs.
Canada’s inflation rate soared to an 18 -year high of 4.4% last month, driven by high gas prices, rising housing prices and rising food prices, putting pressure on the BoC to consider raising interest rates.
The average economist in the October 18-22 survey indicated that the BoC will keep rates unchanged at 0.25% until the first half of next year, interest rates are expected to rise 25 basis points to 0.50% in the third quarter.
