Main as much as this week, the percentages of a further Financial institution of Canada fee hike have been principally a coin toss.

However weak information launched over the previous week have basically “sealed the deal” for one more fee maintain, economists say.

“This week’s information sealed the deal, with the BoC’s Enterprise Outlook Survey weakening sharply and September inflation surprisingly tame,” BMO’s Benjamin Reitzes wrote.

“The most recent information recommend that the weak point seen by many of the first half of the 12 months continued into the second half,” he added. “Whereas inflation stays too excessive, there’s been a gradual deceleration which may be anticipated to proceed given the gentle financial backdrop.”

Final week, weak retail gross sales information confirmed the moderating demand, which is predicted to mood inflation going ahead.

Private consumption is predicted to be “anemic” within the third quarter, rising by simply 1-1.5%, based on TD Economics’ Maria Solovieva.

“The steadiness of dangers for the Canadian financial system is slowly swinging to the draw back as client confidence continues to be soured by the Financial institution of Canada’s fee hikes and elevated inflation,” Solovieva wrote.

Bond markets are actually pricing in over 90% odds of a fee maintain tomorrow. Waiting for the December financial coverage assembly, markets at present see a 28% probability of a further fee hike, though a lot information shall be launched previous to then.

On inflation:

• BMO: “The extent of inflation stays a lot too excessive for consolation, however the pattern is the BoC’s buddy right here. Provided that inflation is essentially the most lagging of indicators, and the financial system is clearly weakening, we’re prone to see ongoing disinflationary stress…there’s no want for additional fee hikes in Canada.”
• CIBC: “Despite the fact that the Financial institution’s core measures of inflation stay too excessive for his or her liking, among the particulars inside [the latest inflation] report, mixed with the stall in financial exercise seen throughout Q2 and Q3, ought to give policymakers consolation that inflation will proceed to ease again to 2% with out the necessity for additional rate of interest hikes.”

On GDP forecasts:

• Nationwide Financial institution: “…there are not any indicators of a restoration within the months forward, with client and SME confidence now at ranges seen solely throughout recessions…a minimum of 43% of the affect of fee hikes has but to be felt on consumption. That is monumental, particularly as households are already exhibiting indicators of working out of steam. In opposition to this backdrop, mixed with the tightening of monetary situations triggered by the worldwide rise in long-term rates of interest, we proceed to anticipate financial lethargy over the following twelve months. We forecast progress of 1.0% in 2023 and 0% in 2024.”

On rate-cut expectations:

• Desjardins: “Many mortgage holders will renew in 2025 and 2026 at greater rates of interest than the rock-bottom ranges they locked in at 5 years earlier. The query is how a lot greater. Ought to central bankers really wish to keep away from cooling the financial system an excessive amount of, they’ll want to scale back rates of interest earlier than hitting that wall of renewals…Finally, the Goldilocks aim must also permit them to start trimming charges in 2024.”
• BMO: “We’ve decreased subsequent 12 months’s complete fee cuts to 50 bps from 75 bps on each side of the border. This displays the theme of ‘greater for longer’ amid continued financial resiliency (however much less so now in Canada) and inflation stubbornness.”

The most recent large financial institution fee forecasts

The next are the newest rate of interest and bond yield forecasts from the Huge 6 banks, with any adjustments from their earlier forecasts in parenthesis.