Photo: James Bombales

Last year, the Bank of Canada hiked the overnight rate twice, bringing it up 50 basis points from its historically low 0.5 per cent. What does 2018 have in store? According to some economists, another hike — and soon.

The overnight rate — which affects mortgage rates — has been forecasted to continue to rise in 2018, but strong December job numbers are pushing economists to predict that the first hike might be just around the corner.

“Canadian employment continued to defy gravity, adding nearly 80 thousand jobs for a second consecutive month in December — the best back-to-back gains in five years,” writes RBC economist Josh Nye in a note released today. “Those trends…further increase the odds that the [Bank of Canada] raises the rates at their upcoming meeting on January 17.”

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There have now been 13 straight months of job gains, and the unemployment rate is 5.7 per cent, the lowest level since 1974.

Scotiabank’s VP and head of capital market economics Derek Holt agrees, saying that he now predicts a January 17 hike.

“The odds of a hike are not 100 per cent given ongoing uncertainties, but in our judgement they are high enough to make the change to our forecast which previously anticipated a hike in April,” he writes, in a note released today.

TD senior economist Brian DePratto writes in his own note that a rate hike in the “near term” now seems “almost certain.”

“For Bank of Canada Governor Poloz, today’s data should act as a further sign that despite hiccups in some areas of the economy, the underlying trend remains healthy,” he writes.

BMO senior economist Robert Kavcic can’t help but agree. “Next week’s Business Outlook Survey [is the] last key piece of information ahead of the January 17 rate decision,” he writes. “If that report flags tightening capacity and broadening labour shortages, the Bank may not wait until March to raise rates.”

Home buyers are anxiously watching for the next rate hike. For homeowners with fixed-rate mortgages, a hike won’t change much (at least until their mortgage comes up for renewal.) But for those with variable-rate mortgages — which move up and down with interest rates — payments will go up.

For prospective buyers, a rate hike generally puts pressure on mortgage rates to rise as well, which might shut some out of the market.

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