The decision of the Bank of Canada to hold interest rates at 1% has left economists, lenders and homeowners guessing as to what will happen next.
Governor Stephen Poloz noted that inflation was slightly higher than expected, slack remains in the labour market, and the housing market is moderating as forecast.
However, he gave little guidance on when another rate rise may occur. Instead he said the BoC was cautious while noting that interest rates will need to rise over time.
Reacting to the news, CIBC Economics’ Avery Shenfeld said that rates could rise by just 50 basis points in 2018 even if the BoC decides to make an increase in January rather than CIBC’s forecast for April.
Meanwhile, Alicia Macdonald, principal economist of The Conference Board of Canada was more bullish: “…with the economy growing in step with the Bank’s forecast, economic capacity rapidly diminishing, and an acceleration in wage growth, we expect that the Bank will continue to gradually increase interest rates throughout next year.”
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