More interest rate hikes 'cannot be ruled out': What economists are saying about the Bank of Canada decision

financialpost.com:

The Bank of Canada raised it benchmark lending rate 25 basis points to five per cent on July 12, adopting what economists called a “hawkish tone” and reminding Canadians that bringing inflation back to the two per cent target remains its priority.

“The Bank remains resolute in its commitment to restoring price stability for Canadians,” it said in its statement.

Underpinning the bank’s decision were concerns about persistently strong domestic demand and an expanding labour market. It also pushed out its forecast for when inflation will return to target by six months into 2025.

“This shift in view may further help explain today’s decision, and the still-tough language,” said Douglas Porter, chief economist at BMO Economics.

So will there be another interest rate hike or is this the last in cycle?

Here’s what economists think the Bank of Canada will do next when it meets after the summer on Sept. 6.

“The 25 basis point rise in the overnight rate to five per cent was broadly expected by the consensus and financial markets, and a continued hawkish tone within today’s statement suggests that risks are skewed towards another hike after the summer. However, after setting their forecasts for GDP growth quite low in prior MPRs (Monetary Policy Reports), the bar set in today’s updated forecast doesn’t seem quite as low. Quarterly growth is expected to be 1.5 per cent in both the second and third quarters, while full year growth rates of 1.8 per cent for 2023 and 1.2 per cent for 2024 are also above our current expectations. Because of this we think that there is scope for the economy to underperform the bank’s new forecasts and for the overnight rate to now remain on hold throughout the remainder of the year, despite the still