The economy, which expanded at a strong 2.9% annual pace in the third quarter, is more vulnerable to a sinking property market and one of the world’s highest household debt-to-income ratios, with the full impact of rate hikes still to be realized.
Only over half of the economists surveyed in recent days, 16 of 30, predicted a half-point increase on December 7 to 4.25%. This reflects a move in October and in line with current U.S. predictions. The Bank of Canada will slow to 25 basis points, fourteen suggested.
Markets are putting in a more than 80% possibility of 25 bps, which would be policymakers’ third consecutive drop in rate-hiking magnitude from a peak of 100 in July.
Andrew Grantham, senior economist at CIBC, said, “The rise in inventory ratios and weakness in domestic demand should be a signpost of weaker domestically-driven inflationary pressures in the future.”
“As such, we continue to expect a final 50bp rate hike to a peak of 4.25%, before the Bank moves to the sidelines in 2023 to observe how the economy is coping with these higher interest rates.”
