BMO Revises Bank of Canada Rate Forecast Higher, Expect 2008-Levels By Next Week

Canadians are about to see interest rates they didn’t think were possible in just a few days. BMO made revisions to its overnight rate forecasts this week. At next Wednesday’s meeting, they’re calling the largest rate hike in two decades. That will bring interest rates (and your borrowing costs) to the highest level since 2008. 

Bank of Canada Expected To Hike Rates To Levels Last Seen In 2008

BMO sees the Bank of Canada (BoC) making a huge hike to interest rates next week. At the July 13th meeting, they’re calling an increase of 75 basis points (bps) to the overnight rate. It would be the largest hike since 1998, and push the overnight rate to 2.25% — the highest level since 2008.

BMO Made An Upward Revision To It’s Forecast For This Cycle’s Peak

BMO also made an upward revision to peak rates during this cycle. By year end, they see the overnight rate hitting 3.25%, about 25 bps above the neutral policy rate. The neutral rate is the level where the overnight rate no longer provides inflation (below) or it’s not a drag on the economy (above). 

Basically BMO expects the central bank to try and cause friction to reduce inflation. They have pretty good reason to believe that can happen — the BoC said it would. Returning inflation back to the target range is the goal, as they’re hoping to reduce the risk of stagflation. 

Canadian Interest Rates Will Remain At Higher Levels Even With A Weak Economy

Canada’s economy, complete with over bloated government and household debt, isn’t expected to handle higher rates well. BMO is only forecasting higher rates will last until 2024, at which point they see rate cuts. Even with cuts, they don’t expect interest rates to fall to the level 2020 started with. 

Understandably a 40-year high for inflation is going to require a little firepower to cool things down. It’ll slow the economy and force the central bank to cut rates at some point, and ease pressure on the economy. It might be years before that happens though, and the cuts aren’t expected to bring rates to levels experienced in the past decade. We’re officially set to enter a new era of more efficient capital and higher rates. 



We encourage you to have a civil discussion. Note that reads "civil," which means don't act like jerks to each other. Still unclear? No name-calling, racism, or hate speech. Seriously, you're adults – act like it.

Any comments that violates these simple rules, will be removed promptly – along with your full comment history. Oh yeah, you'll also lose further commenting privileges. So if your comments disappear, it's not because the illuminati is screening you because they hate the truth, it's because you violated our simple rules.

  • Fraser 2 years ago

    lollllllllllllllll, bring it on…higher please

  • Jim 2 years ago

    Seems like a perfect storm is brewing

  • Ravi 2 years ago

    “The largest rate hike in decade”. “Higher mortgage rates” Why don’t you tell the public that these are actually normal mortgage rates. Don’t you think you are glorifying the situation a tee bit?

    • Kat 2 years ago

      It is about time, borrowing money should have some risk attached too it. Even higher makes more sense, time for housing to not be a investing commodity and it be such a huge part of our GDP.

  • Claire 2 years ago

    There’s actually a “higher interest rates, please” club here 😀

  • Yofinance 2 years ago

    About f’n time a bank actually comes out with a forecast that is sane and makes sense. This fake debt fueled economy needs a massive reset where capital needs to be diverted to more efficient and sustainable areas of the economy other than housing. Let’s this forecast is true because like anything else there is no gain without any pain. Bring it!

  • cdr 2 years ago

    About damn time.

    BoC OLR should never be below 2% unless in recession. Over the past 14 years when economy was chugging along, sub-2% distorted capital market efficiencies.

  • Terry 2 years ago

    Should never of been so low in the first place but just wait till they start raising taxes to make payments on the federal debt

  • Joe Q 2 years ago

    GIC @ 8% please.

  • Larry G 2 years ago

    Plenty of takers of low rate deals for way to long. The reality for those takers, including governments is you own the debt. Higher rates were inevitable. Now we need to rejig our spending priorities and deal with a new spending priority. A trip around my “hood” shows an increasing amount of For Sale signs hanging around longer with interesting phrases like “New Pricing”. Oh and yeah don’t forget those once sought after big ticket must have “toys” now selling at deep discounts. As summer already starts to fade, we will likely start to see people looking for work. Believe it or not!

    • J 2 years ago

      Most realtors are part-time, that’s why they don’t make it. It’s like any competition, only the best make it to the top and survive any down turn. All these places looking for help and not finding any? They’ll find some soon enough when the part-time realtors finally quit and accept that their stream of the gold rush has no gold. IIWII, jumping into the frenzy will get you burned.

  • Phil 2 years ago

    It’s about time! The whole economy has been seriously distorted for the better part of 15 years. Just re-balancing that will be very hard on all of us but worth the pain long term.

Comments are closed.