Lending rates may increase within a year
July 2, 2021
The majority of Canadian economists believe the Bank of Canada’s 0.25 per cent rate will only hold for 12 to 18 months, with 55 per cent believing the second half of 2022 is when the rate will rise—marking a significant shift in the panel of economist’s perception from the last two Bank of Canada surveys in March and April.
The latest findings are from the Finder's BoC Overnight Rate Survey, released June 9, 2021.
Moshe Lander, senior lecturer at Concordia University explains the current economic landscape and why the second half of 2022 is the most feasible timeline for a rate hike.
“The bank needs to give the economy some time and space to breathe and figure out what things look like before acting. In that time, we are likely to see a federal election, so the Bank of Canada should hold off on its decision until there is some degree of calm [with the pandemic] so that the increase in rates will not damage a nascent recovery.”
Murshed Chowdhury, associate professor at University of New Brunswick agrees with the majority but explains the rate increase,“could happen sooner depending on our success to fully vaccinate most of [Canada] and our speed of recovery.”
Philip Cross, senior fellow at the MacDonald Laurier Institute, is slightly more optimistic than the majority saying, “The Bank has already raised the possibility of raising in the second half of 2022, but as prices accelerate and the economy has recovered they will have to move sooner.” Unlike the majority, Vik Singh, assistant professor for Ryerson University, believes a rate hike is a little further off, stating, “Inflation will be a huge concern going forward fuelled by massive government spending.”