Photo: James Bomables

On Wednesday, the Bank of Canada once again chose to maintain the 1.25 per cent overnight rate. But its statement could hint that another hike could be on its way very soon.

“Developments since April further reinforce governing council’s view that higher interest rates will be warranted to keep inflation near target,” wrote the central bank, in a statement.

According to BMO senior economist Benjamin Reitzes, the next hike could come as soon as July.

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“The tone of the [Bank of Canada’s] statement was more hawkish than expected, with the concluding paragraph dropping two strong hints that a July hike is on the table,” he writes, in a recent note.

According to Reitzes, the Bank dropped the word “cautious” in reference to “future policy adjustments,” a sign that they are looking to push rates higher in July.

And while the Bank has mentioned a cooling housing market as a factor in its decision to delay hikes in the past, Reitzes says that the statement reflected the fact that the market is currently doing better than expected.

“While the softness in housing was mentioned, policymakers expect ‘housing activity will pick up’ supported by solid income growth,” he writes. “We’ll get some city home sales data for May next week, and we’ll see if they’re consistent with the BoC’s view.”

Of course, there’s always developments in the States to consider. Just yesterday, the US announced that it would be imposing steel and aluminium tariffs on Canada, as NAFTA talks continue to drag on. But Reitzes says the Bank doesn’t seem overly concerned with what’s been happening south of the border.

“The statement was much more hawkish than the market anticipated, especially after the early week global financial market gyrations,” he writes. “This is a clear warning shot that a July rate hike is a possibility.”

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