Calls grow for Bank of Canada to ‘crush’ inflation with another rate hike
Global News
Scotiabank's Derek Holt says the Bank of Canada might raise interest rates again in June following a surprise uptick in inflation in April.
The Bank of Canada is facing renewed calls for another interest rate hike after a surprise uptick in inflation last month.
The annual inflation rate in April rose slightly to 4.4 per cent, compared with 4.3 per cent in March, Statistics Canada reported Tuesday.
The central bank has kept its key rate on hold in two consecutive decisions after a rapid hiking cycle that saw the benchmark rate rise 4.25 percentage points over the course of a year.
Bank of Canada policymakers said the pause is conditional on inflation returning to three per cent by mid-year and left the door open to additional rate hikes “if needed.”
Money markets continue to expect the central bank will hold steady at its next decision on June 7, but odds of a hike next month rose to roughly a one in three after the inflation surprise on Tuesday.
Derek Holt, the head of Scotiabank Capital Economics, is among the voices on Bay Street expecting another interest rate increase — and sooner, rather than later.
Holt said in a note to clients on Wednesday that if the Bank of Canada does need to increase its benchmark rate, which sets the cost of borrowing for lenders and their customers, it’s better to do it early.
If business and consumer expectations for inflation remain elevated for longer, it’ll make it that much harder to get price pressures back under control and hit the Bank of Canada’s two per cent target, Holt argued.