Bank of Canada Likely to Hold Rates Steady for 2023 : Reuters Poll

© Reuters.

By Ketki Saxena

Investing.com -- The majority of economists surveyed by Reuters predict that the Bank of Canada (BoC) will maintain its key interest rate at 4.50% for the remainder of this year.- but with relatively low certainty: the majority of economists also acknowledge that the likelihood of at least one more rate hike remains high. 

A significant majority—24 out of 28 economists—anticipate that after their meeting on June 7th, BoC will keep its policy rate steady at 4.50%. Approximately two-thirds expect no changes to be made to overnight rates throughout this year.

Just four economists who were polled between May 25th and June 1st forecasted a rise by 25 basis points up to an interest rate level reaching 4.75% during June’s meeting; meanwhile, one economist suggests July as an alternative timeline for such action by BoC officials.

However, it's worth noting that when asked about the likelihood of at least one more rate increase from BoC, nearly three-quarters of respondents deemed it as high risk. They also indicated that if such a move were to occur, it would likely happen either this month or next.

Inflation continues to exceed twice the BoC's target rate of 2%, and with a robust job market, resilient growth, and potential signs indicating a shift in the housing market, many experts believe there is still a strong possibility that the BoC may break from its pause on interest rates since January.

Earlier this week, GDP data showed that the Canadian economy demonstrated impressive growth during Q1 with an annualized pace of 3.1%, surpassing expectations and recovering from a contraction in the previous quarter - exceeding the central bank's own projections for economic expansion.

Furthermore, the increasing expectations for additional rate increases from the U.S. Federal Reserve could further pressure the BoC to resume tightening monetary policy as well.

Markets are currently pricing in a 60% probability of an interest rate hike by July.