Rate Hike in July Incoming?


Housing market trends continue to point towards increasing rate hikes

Data released last week leads to uneasy speculation of current market trends. TD Economics senior economist Brian DePratto analyzed the data to find that wholesale trade was flat in the second quarter of 2018 and that retail figured declined much more than economists had expected.

Added on to that is inflation data which showed no change from a year ago at 2.2% in May, not what the market was expecting.

Bank of Canada’s Governor Stephen Poloz is giving a speech this Wednesday, June 27th, that will focus on monetary policy and is expected to be widely studied as July quickly approaches.

Also releasing this week are reports on household credit data and the Business Outlook Survey, not to mention the potential for future trade tension talks to add risk to the economy.

The underlying question amidst all of this speculation is simple, will the Bank of Canada increase rates?

“Unless these risks are sufficiently reduced or Canada’s economy accelerates markedly, we expect the Bank to move its policy rate by only 50bps (i.e. two hikes) per year,” writes DePratto in his ‘Weekly Bottom Line’. “As it stands, July remains most opportune time to hike, but with inflation remaining tame it is hard to expect much urgency.”