Consumer price index has economists predicting more rate hikes


With the newest inflation knowledge exhibiting no indicators of a considerable cool-down, economists are forecasting the Bank of Canada will proceed its reign of aggressive rate hikes, and a few predict a “technical recession” in the course of the first half of 2023.

Data launched by Statistics Canada on Wednesday signifies that the buyer price index (CPI) is up 6.9 per cent year-over-year in September, regardless of economists beforehand anticipating a mere 6.7 per cent enhance.

In an interview with BNN Bloomberg on Tuesday, Jean-Francois Perrault, chief economist at Scotiabank, mentioned “there’s a limit to how much [the Canadian economy] can withstand.”

“You’ve got the pretty horrible situation in Europe. Obviously, China is going through a very significant slowdown — perhaps so significant that they decided yesterday not to publish economic data for a little while. And we got the U.S. where things are slowing and the Feds indicated that they want to raise interest rates quite a bit more and that will lead to a recession there.”

Perrault mentioned that these financial strain factors make it more and more more troublesome for Canada to face up to recession fears, however he additionally identified that there’s nonetheless a good quantity of resilience all through varied sectors of the financial system.

“You can think of it as the economy kind of taking a breather for a few quarters,” he mentioned. “The Bank of Canada is trying to engineer a cooling of the economy. It’s trying to slow inflation. So this slowdown that’s occurring is consistent with that, and hopefully helpful from an inflation management perspective as we look to inflation over the next year and a half.”

Here’s what different economists are saying concerning the current inflation knowledge and what’s anticipated from the Bank of Canada as we method 2023.


Bank of Montreal Chief Economist Douglas Porter mentioned in a word to purchasers Wednesday that inflation didn’t ease as a lot as anticipated final month, “even as gasoline costs took a big step back.”

“Underlying inflation remains extremely persistent and sticky at above 5 per cent.”

He added {that a} weak Canadian greenback and a probable 75 basis-point hike from the U.S. Federal Reserve at its subsequent assembly pave the way in which for a 75 basis-point hike.


Leslie Preston, a senior economist and managing director at TD Bank, mentioned in a launch Wednesday that will increase within the coverage rate are beginning to impression the financial system. Inflation knowledge, she mentioned, emphasizes the necessity for a hefty 50 basis-point hike subsequent week within the BoC’s in a single day rate.

“We expect the bank is getting closer to a pause on rate hikes, once it reaches four per cent by the end of the year,” Preston mentioned.


Derek Holt, a vice-president and head of capital markets economics at Scotiabank, anticipates the Bank of Canada to extend its coverage rate by one other 75 factors subsequent week, as he mentioned in a word to buyers Wednesday. He additionally talked about that he had been supporting a 75 basis-point hike earlier than the discharge of CPI figures.

“[Overnight index swap] pricing for next week’s BoC decision has moved from pre-data pricing around 60 bps to over 75 bps now as a three-quarters of a percentage point rate hike is now fully priced,” Holt mentioned.


Benjamin Tal, the deputy chief economist at CIBC, mentioned in an e-mail to BNN Bloomberg on Wednesday that he predicts a 75 basis-point hike from the central financial institution.

Karyne Charbonneau, an economist at CIBC, mentioned in a word to buyers Wednesday that the central financial institution continues to have “work to do” in its struggle to successfully fight inflation.

“As such, we now believe the Bank will need to go with a 75 bps hike next week rather than the 50 bps we previously anticipated. The Bank might then be left with a last 25 bps in December if growth numbers support it,” Charbonneau famous.

With recordsdata from Daniel Johnson 


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