“But the risks of a hard landing have not gone away, and of course the higher the Bank takes interest rates, the longer they stay at these high levels, the greater the risk to the economy.”
Governor Tiff Macklem: “We’ve come a long way, and we don’t want to squander the progress we’ve made. We need to stay the course to restore price stability for Canadians.”https://t.co/zyuRcYxFbd#cdnecon pic.twitter.com/HrXILs6z4b
— Bank of Canada (@bankofcanada) July 12, 2023
Will the Bank of Canada raise rates again in 2023?
The decidedly hawkish tone of the Bank’s statement surprised some observers, particularly as Governor Tiff Macklem indicated in a post-announcement press conference on Wednesday that the decision to hike was by no means a clear-cut one.
There had been some uncertainty over whether the Bank would hike, Porter noted, with markets only around three-quarters priced for it – but the central bank also didn’t completely close the door on further rate hikes down the line.
That said, BMO expects Wednesday’s move to be the last rate bump of 2023. “[The Bank] definitely sounds concerned, still about underlying inflation,” Porter said. “But having said all that, reading between the lines, our view is that they probably think they’ve done enough. Of course, we’ll have to see how inflation does in the months ahead and how well the economy holds up.
“But our view is, this is probably enough to bring down inflation further, and it’s enough to act as a real restraint on the economy. So we suspect that this will be the last hike of the year.”