High inflation is prompting central banks everywhere to lift interest rates. Price pressures are widespread.
The Bank of Canada has raised its benchmark interest rate five times this year with the overnight target rate increasing from 0.25 per cent in January to 3.25 per cent in September.
We expect a further hike of 50 basis points in October 2022 before a Bank pause for economic assessment.
The Bank should start cutting rates in the second half of 2023 by 25 points in each of the third and fourth quarters.
The U.S. Federal Reserve Board seems poised to raise the federal funds rate by 50 basis points in November and by 25 points in December. This will put the rate near 4.0 per cent by year-end.
We believe Canada’s dollar will remain weak, hovering below US$0.78 in the fourth quarter of 2022 and through much of 2023.
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