According to the OECD’s Global Economic Outlook released this week, the Bank of Canada should begin the process of tightening
monetary policy at its next meeting on May 31st, increasing rates by 25 basis points. This mirrors calls by the CD Howe’s non-partisan Monetary Policy Council who have also been calling on the BoC to embark further down the path of normalizing interest rates. In total, the Monetary Policy Council would like to see the key policy rate increased 125 basis points, to 2.5%, over the next 12 months.

Although there is still a lot of uncertainty about when and by how much the BoC is going to start raising interest rates, few expect the central bank to hike on May 31st. Currently, the market is predicting the central bank will start raising rates in September with a smaller probability at the July meeting.*

Courtesy of Dan Sumner, Economist, ATB Financial