Scotiabank Sees Eight Bank of Canada Rate Hikes by End of 2023

(Bloomberg) -- The Bank of Canada will raise its benchmark interest rate four times in the second half of next year and another four times in 2023, according to a top economist at the Bank of Nova Scotia. 

Policymakers led by Governor Tiff Macklem will begin a series of eight 25-basis-point hikes in July of next year, Scotiabank’s Derek Holt said Wednesday on BNN Bloomberg Television. That will be followed by moves in September, October, and December. Holt predicted the the pace of tightening would then slow, with quarterly moves in 2023 bringing the policy rate to 2.25% by the end of that year.

Holt’s aggressive forecast came after Statistics Canada reported that yearly inflation hit 4.4% in September, the highest since February 2003 and the sixth consecutive month of readings beyond the central bank’s control range.

“This isn’t transitory at all,” Holt said on BNN. “You can’t just talk through inflation readings like this.”

With rates currently at an emergency low of 0.25%, Scotia’s estimates mean the Bank of Canada would bring borrowing costs into the neutral range -- , the point at which they are no longer stimulative nor restrictive -- within about two years. The hiking cycle would put the country’s key lending rate at its highest level since 2008. 

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