{"id":19686,"date":"2022-04-13T11:33:00","date_gmt":"2022-04-13T18:33:00","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=19686"},"modified":"2022-04-13T11:45:16","modified_gmt":"2022-04-13T18:45:16","slug":"rate-hikes-in-updated-forecast-targe-range-terminus-at-2-75-to-3-by-mid-next-year","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2022\/04\/rate-hikes-in-updated-forecast-targe-range-terminus-at-2-75-to-3-by-mid-next-year\/","title":{"rendered":"Rate Hikes in Updated Forecast &#8211; Target Range Terminus at 2.75% to 3% by Mid-Next Year"},"content":{"rendered":"<p style=\"text-align: justify;\">The Bank of Canada is scheduled to make its next rate announcement in a couple of weeks, and one bank is predicting that this will be the start of two back-to-back 50 basis point (bp) hikes to the overnight rate.<\/p>\n<p style=\"text-align: justify;\">In a recent Bank of Montreal (BMO) Economics EconoFACTS report, deputy chief economist Michael Gregory and Benjamin Reitzes, managing director of Canadian rates and a macro strategist for fixed income strategy, published updated predictions on policy rates for the Bank of Canada and the Federal Reserve. A \u201csharply hawkish turn in rhetoric,\u201d from both federal banks in response to rising prices prompted the economists to revise their outlooks.<\/p>\n<p style=\"text-align: justify;\">Now, BMO is forecasting that there will be a 50 bp rate hike at each of the next two BoC policy announcements, which are scheduled for April 13th and June 1st. This would be followed by a 25 bp increase in July.<\/p>\n<p style=\"text-align: justify;\">\u201cThat would put rates at 1.75%, the lower end of the BoC\u2019s 1.75% to 2.75% neutral range and the peak of the last cycle,\u201d said the report. \u201cIn addition, quantitative tightening (QT) looks to start at the April meeting.\u201d<\/p>\n<p style=\"text-align: justify;\">The overnight rate is currently 0.5%, and was increased from 0.25% during the BoC\u2019s March 2nd rate announcement. In a previous EconoFACTS report, Reitzes forecasted that the BoC would make a 25 bp rate hike during the next scheduled meeting in April.<\/p>\n<p style=\"text-align: justify;\">As inflation soars well above the BoC\u2019s 2% target \u2014 the consumer price index rose 5.7% annually in February \u2014 policymakers have \u201cflagged a more hawkish path for interest rates.\u201d<\/p>\n<p style=\"text-align: justify;\">At the Federal Reserve Bank of San Francisco Macroeconomics and Monetary Policy Conference last week, the BoC\u2019s deputy governor, Sharon Kozicki, said that the BoC is \u201cprepared to act forcefully,\u201d to return inflation to target. In the same speech, Kozicki also said that the \u201cpace and magnitude of interest rate increases and the start of QT to be active parts of our deliberations at our next decision in April.\u201d<\/p>\n<p style=\"text-align: justify;\">Words like \u201cforcefully\u201d and \u201cmagnitude\u201d, in addition to the change in tone, are the reasons Gregory and Reitzes say they have changed their BoC rate call.<\/p>\n<p style=\"text-align: justify;\">The BMO economists stated that they anticipate a \u201cmore tepid pace of tightening,\u201d in the following months, with 25 bp rate hikes at each of the next three meetings in October, January and April. This would leave policy rates at 2.5%, near the higher end of the BoC\u2019s neutral range.<\/p>\n<p style=\"text-align: justify;\"><strong>Federal Reserve to increase rates by 50 bps, twice<\/strong><\/p>\n<p style=\"text-align: justify;\">Over at the Federal Reserve, Chair Jerome Powell\u2019s \u201ccandid policy signalling,\u201d in a recent speech has prompted BMO to adjust their call on policy rate hikes after he stated that there was \u201can obvious need to move expeditiously to return the stance of monetary policy to a more neutral [level].\u201d<\/p>\n<p style=\"text-align: justify;\">The BMO economists now anticipate that the Federal Open Market Committee (FOMC) will raise rates by 50 bps during the next two meetings, then shift back to a 25 bps per meeting for the rest of 2022. This will send the target midpoint to 2.375% by December, 50 bps above BMO\u2019s previous call.<\/p>\n<p style=\"text-align: justify;\">\u201cGiven this is the FOMC\u2019s median longer-run neutral level and the slightly onerous peak of policy rates last cycle, we suspect the Fed will move more cautiously (every second meeting) in 2023,\u201d said the report. \u201cWe see the target range terminus at 2.75% to 3.00% by mid-next year.\u201d<\/p>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/www.livabl.com\/2022\/03\/bmo-predicts-hikes-bank-canada.html\" target=\"_blank\" rel=\"noopener\">BMO Predicts Two 50-Point Rate Hikes by Bank of Canada in Updated Forecast<\/a> by Michelle McNally &#8221; Livabl<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Bank of Canada is scheduled to make its next rate announcement in a couple of weeks, and one bank is predicting that this will be the start of two &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2022\/04\/rate-hikes-in-updated-forecast-targe-range-terminus-at-2-75-to-3-by-mid-next-year\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-19686","post","type-post","status-publish","format-standard","hentry","category-mortgage"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Rate Hikes in Updated Forecast - Target Range Terminus at 2.75% to 3% by Mid-Next Year &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2022\/04\/rate-hikes-in-updated-forecast-targe-range-terminus-at-2-75-to-3-by-mid-next-year\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Rate Hikes in Updated Forecast - Target Range Terminus at 2.75% to 3% by Mid-Next Year &#8226; Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"The Bank of Canada is scheduled to make its next rate announcement in a couple of weeks, and one bank is predicting that this will be the start of two &hellip; [read more]\" \/>\n<meta name=\"twitter:creator\" content=\"@RoryClipsham\" \/>\n<meta name=\"twitter:site\" content=\"@RoryClipsham\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Rory Clipsham\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2022\\\/04\\\/rate-hikes-in-updated-forecast-targe-range-terminus-at-2-75-to-3-by-mid-next-year\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2022\\\/04\\\/rate-hikes-in-updated-forecast-targe-range-terminus-at-2-75-to-3-by-mid-next-year\\\/\"},\"author\":{\"name\":\"Rory Clipsham\",\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/#\\\/schema\\\/person\\\/0672b9777e67473b9bd9247df49499c7\"},\"headline\":\"Rate Hikes in Updated Forecast &#8211; 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