Bank of Canada set for another 50bp hike | ING Economics

The Bank Of Canada Is Preparing To Announce Its Final 25bp Hike

A strong economy, booming jobs market, and elevated inflation argue for another "forceful" 50bp hike on 1 June. And the Bank of Canada is unlikely to stop there, with a red hot housing market and support from rising commodity prices suggesting it may be even more aggressive than the Fed this year. We expect CAD to benefit from BoC tightening in the medium term

Source: Shutterstock
Source: Shutterstock

Another 50bp from the BoC

The Bank of Canada looks set to raise the policy rate a further 50bp on Wednesday as officials become increasingly anxious about high inflation spiralling out of control. Annual CPI is already up at 6.8%, the highest rate since January 1991, while the labour market has more than fully recovered all of the jobs lost during the pandemic. With job vacancies now exceeding one million, there is clear concern that wage rates will rise even more rapidly, with the Canadian Federation for Independent Business reporting a median expectation for pay rises of 3.5% over the next 12 months. Some 35% of respondents thought it would exceed 5% in an economy that is expected to grow 4% this year, all of which runs the risk of inflation staying higher for longer.

Canada jobs market outperforms that of the US - employment levels versus pre-pandemic peak

Source: Macrobond, ING
Source: Macrobond, ING

75bp can't be ruled out

In response, the Bank of Canada's commentary is becoming more robust. Deputy Governor Toni Gravelle warned this week that inflation has been “higher and more tenacious” than expected and the Bank is “committed” to bringing it down to target. Moreover, “our policy rate, at 1%, is too stimulative” and the bank is “prepared to be as forceful as needed” to get inflation to 2% and that involves getting to the neutral range for rates at 2-3% “quickly”.

This followed comments from Senior Deputy Governor Carolyn Rogers who also pointed to the need to get interest rates higher quickly “with the Canadian economy starting to overheat”. With BoC Governor Tiff Macklem having told us back in April that the Bank will no doubt be “considering taking another 50bp step”, it is unsurprising that the market is fully backing such a move on 1 June, given the latest raft of data. We would argue that you cannot dismiss the possibility of a 75bp hike given the current macro environment.

Read this article on THINK

Interest rates Canada CAD BoC


This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The Bank Of Canada Is Preparing To Announce Its Final 25bp Hike

ING Economics

INGs global economists and strategists tell you whats happening and is likely to happen in the world of global markets.

Our analysis and forecasts will help you respond and stay a step ahead in the world of macroeconomics, central banks, FX, commodities and everything else in between. Visit

Follow ING Economics on social media:

Twitter | LinkedIn