Action Economics said in a research note that it expected the Bank of Canada to begin increasing its main interest rate in July as the labour market continued to recover.
The general uptrend in hiring since last August will leave an upbeat outlook for Canada’s job market and broader economy that underpins expectations for BoC tightening to start in July.
We expect the BoC to hike rates 25 bps in July. The March announcement began to build the case for rate hikes in the second half of this year as the Bank is projected to move rates from currently extraordinary accommodative levels to merely accommodative levels. At the same time, the prominent role of monetary policy in the recovery and continued downside risks to growth and inflation back the maintenance of an 0.25% floor through Q2 of 2010 and a measured approach to second half tightening.
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