How High Will The Bank of Canada Hike Rates? We Asked The Country’s Top Experts

Canadians have never had so many monetary policy questions, especially homebuyers. Our crystal ball is in the shop, so we can’t tell you what interest rates will be. However, we can do the next best thing — present you with the Canadian Overnight Rate Sentiment Index. We polled the country’s top economics and finance experts for their Bank of Canada (BoC) forecast. We then de-biased it by disassociating the expert’s name, and plotted the forecasts. While we can’t tell you the future (yet!), we can help you understand where the best of the best see things heading. 

A Quick Note On Forecasting

It might seem obvious what a forecast is, but it’s worth repeating for those who don’t work with them regularly. A forecast estimates a future trend based on the current available data. That last part is important, since it emphasizes this is a snapshot in time, not a living and breathing model. As the environment changes, sometimes because of the forecast, so does the outcome.

What you’re looking at is a snapshot of what experts forecast on January 25, 2022 — Bank of Canada rate announcement eve. So don’t send them emails in a year to complain. Though you might want to leave out a glass of whiskey and cookies in case they visit.

About Today’s Data: Sentiment, and Dot Plots

Today we’re measuring future sentiment with a dot plot (Cleveland-style, for the stat nerds). We had each expert plot where they see the BoC overnight rate after each rate announcement over the next year. The more dots at a specific level after an announcement, the stronger the sentiment is for that move. What you’re looking for is the most dots in a range, and that’s the general consensus.

Since we’re only looking for sentiment, we’ve anonymized the plots from the expert. When looking at sentiment, it’s more important to see where it’s concentrated, than who said it. That said, we wanted this to be exclusively informed opinions, so we stuck to experts — though public opinion is just as important, but for a different reason. The respondents are some of the country’s most prominent economics and finance experts. You can read more about them at the end. Now, let’s see those results.

Canada Is Most Likely To See Higher Interest Rates — Much Higher

Rate announcements occur at predetermined dates, so we’ll go through each meeting. Once again, we’re not looking at the individual plots per se, but where they’re concentrated. The key takeaway from a dot plot is where the sentiment skews — higher or lower. In this case we’re near the bottom, so we’re mostly focused on how high it goes.

Canadian Overnight Rate Sentiment Index

A “dot plot” of forecasts for the Bank of Canada overnight rate after each rate announcement, demonstrating sentiment distribution. 

Source: Better Dwelling.

Jan 26, 2022

The January 26, 2022 meeting is a bit of a surprise to be honest, with few seeing higher rates. Eleven of the thirteen experts are calling no change, with just two forecasting higher rates. To be fair, most financial institutions call quarters, not necessarily meetings. Many see the first hike happening in Q1, but at the next meeting.

Mar 2, 2022

The March 2, 2022 meeting is where the experts felt most confident about higher rates. Over half of respondents see rates at 0.50%, with one even calling 0.75%. Five still don’t see a change in the numbers though.

Apr 13, 2022 

April is where sentiment shows a higher overnight rate is almost a certainty. Five experts called the overnight rate at 0.50% after this meeting, and another five have forecast 0.75%. Just three were stuck at 0.25%, but in general they didn’t see higher rates in Canada.

Jun 1, 2022

After the June 1, 2022 meeting, sentiment shifts above 0.75%. Four experts are at 0.75%, and another three at 1.00%. Three are also 0.50% and the remaining unmoved. 

Jul 13, 2022

Borrowing rates should be significantly higher than today by the end of the July meeting. Five experts see the rate at 0.75%, three at 1.00%, and one at 1.25%.  Just four remain at 0.50% or lower.

Sep 7, 2022

Not a big shift from Jul to Sep, most people must have been on vacation. The overnight rate is essentially the same as the previous meeting, with two changes. The 0.75% camp drops by one, and the 1.25% range gains another forecaster.

Oct 26, 2022

October meetings are significant ones, and this is no different in the forecast. Sentiment skews to 1.00% and above, with six calling the overnight rate at one point. Another three have forecast 1.25%, and the four remaining are at 0.50% or lower. Someone’s not feeling the robust economy.

Dec 7, 2022

Not a lot happens in December, with this meeting making only minor changes. The 1.00% forecast sees another disappear and move up the forecast. Another expert shifts up to 1.50% as well, in line with most bank forecasts. That last point is interesting, since 1.50% is a common forecast, but few of these experts see it there by year-end.

Once again, we can’t for sure tell you where interest rates are heading over the next year. However, the consensus is they will be going higher — a lot higher.

Expert Panel

Douglas Porter, Chief Economist, BMO

Craig Wright, Chief Economist, RBC 

Jimmy Jean, Chief Economist, Desjardins

Pedro Antunes, Chief Economist, The Conference Board of Canada

Tony Stillo, Director of Canada Economics, Oxford Economics

Prof. Atif Kuburi, Professor Emeritus of Economics at McMaster University and Founder of Econometric Research Ltd

Carl Gomez, Chief Economist and Head of Market Analytics, CoStar Group

Prof. Angelo Melino, Professor of Economics, University of Toronto

Prof. Moshe Lander, Senior Economics Lecturer, Concordia University

Dan Eisner, Founder and CEO, True North Mortgage

Ron Butler, Founder and mortgage industry veteran, Butler Mortgage Inc.

Prof. Bernard M. Wolf, Professor Emeritus Schulich School of Business, York University

Bryan Yu, Chief Economist, Central 1 Credit Union

7 Comments

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  • Fazid 8 months ago

    Solid job as always. Interesting to see the weight is heaviest at 1.00% by year end, while everyone is forecasting 50% higher publicly.

  • Christopher Barclay 8 months ago

    Variable gap about to get crushed. Giddy up!

  • MR 8 months ago

    Canada is no longer attractive due to ridicules home prices. States looks way more attractive compared to Canada. TN visa and eventually citizenship is probably the next destination.

    Wish you all a very happy laundering time in Canada.

  • cholds 8 months ago

    The fact that 3 of these ‘experts’ see no rate hikes this year whatsoever should likely discount their qualifications…

    • Julian 8 months ago

      3 months ago most people had written off covid, than came omicron. What’s if the next variant is as contagious and resistant to the vaccine ?! I hope not but I say their is a reasonable chance interest rates don’t rise. Covid to the economy is like packing a poker game with jokers. Nothing is certain !

  • Kris 8 months ago

    So… No rate hike today! (Jan. 26). There won’t be one in March, either. What these experts do not seem to take into account is that the Bank of Canada decision-makers need to prioritize proving themselves right & not upsetting their investor friends — not fighting inflation and making real estate affordable. All the “warnings” are meant to keep the rest of us hoping. They won’t translate into actual rate hikes anytime soon.
    They are doing all this with impunity, mind you. The federal government doesn’t seem interested in getting into this discussion at all (let alone take any action). In addition, most Canadian media outlets are calling what is happening “keeping the rate steady” and applauding the warnings as if they were enough to fix everything. All this “steadiness” and “cautiousness” is making it impossible for younger Canadians to ever afford a house, but Tiff & friends don’t have to care about that.

  • Im Therious 8 months ago

    “See you later!” said the horse to the barn.

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