Investors and traders are betting on more interest rate increases from the Bank of Canada this year as inflation remains stubbornly high and the economy continues to outperform.
Overnight swap data shows increased odds of an interest rate hike from Canada’s central bank at its July meeting this year.
Additionally, any interest rate cuts aren't expected now until 2024, at the earliest.
Markets are pricing in more interest rate increases following a spate of stronger-than-expected economic data, including related to Canada’s job market, which remains red hot.
Aside from a sharp downturn in the real estate market, economic data in recent weeks shows that the Canadian economy remains strong and is outperforming the expectations of economists.
Earlier in February, markets were expecting no further rate hikes in Canada this year and expected an interest rate cut as early as this autumn.
Bank of Canada Governor Tiff Macklem has said that the central bank is on a “conditional pause” with interest rate increases to assess their impact on the economy.
However, Macklem has warned that the central bank could resume raising interest rates if the data shows that Canada’s economy continues to surge forward.
The Bank of Canada’s trendsetting overnight interest rate now stands at 4.50%, its highest level since the 2008 financial crisis.
