Canadian Imperial Bank of Commerce ( CIBC (TSX:CM)) has predicted an upward revision in US economic growth and an additional Federal Reserve rate hike this year, a forecast that contradicts current market expectations. The bank has assigned an 8% probability of a rate hike on November 1 and a 30% chance for December 13.
CIBC's updated forecast includes a higher US growth rate, a delayed slowdown, and a third-quarter GDP boost to nearly 4%, up from its earlier estimate of 2.5%. The bank also sees a slight chance of negative growth in the fourth quarter.
In the view of CIBC, the central bank can avoid a recession by easing rates in the second half of 2024 if it plays its cards right. However, it does not foresee any changes to its Bank of Canada terminal rates forecast.
The bank is closely following speeches from Federal Reserve Bank of New York President John Williams and Federal Reserve Chair Jerome Powell next week for signals about rate setting influenced by long rates and higher long-dated yields, ahead of the Federal Open Market Committee blackout period.
CIBC is also monitoring indicators such as an inverted yield curve, slowing bank lending, housing starts and resales, and the potential for US growth to stall in the first quarter of 2024 due to conditional elements of the rate hike call.
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