Bank of Canada Eyes Higher Interest Rates: Canada’s Two-Year Financial Markets Outlook

The Conference Board of Canada, 14 pages, July 15, 2022
Issue Briefing
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This quarterly economic forecast presents the medium-term outlook for the Canadian economy. This release focuses on financial markets. For an overview of all major components of the economy, go to the Canadian Outlook main page.

Document Highlights

  • The Bank of Canada (the Bank) will increase its trend-setting rate seven times in 2022, with the first three hikes already history.
  • The ongoing Ukraine conflict challenges the Bank. While surging inflation necessitates higher interest rates, a longer than expected war poses serious economic threats and could prompt the Bank to pause such hikes.
  • Canada’s dollar will move up to near US$0.81 by this year’s fourth quarter, then ease in early 2023 after oil prices peak.
  • The Federal Reserve (the Fed) boosted its policy interest rate by an aggressive 75 basis points at its June meeting. The Fed will match the Bank of Canada’s seven hikes this year.
  • The European Central Bank (ECB) is also reluctantly tightening. The ECB plans to end net bond purchases in July, and to lift its main policy rate by 25 basis points near the end of the month.
  • The Bank of England (BOE) lifted interest rates five times since last December. The BOE may further raise rates in the first half of 2023 as U.K. inflation is higher than that of the European Union or the United States.
    Inflation remains low in Japan, but at least consumer prices are rising. The country has suffered deflation for years. No interest rate increases appear imminent.

Table of Contents

Key Findings
Financial Markets Snapshot
Overview
Monetary Policy in Canada
Monetary Policy in Other Countries
Methodology

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