U.S. inflation could push Bank of Canada to move policy rate higher than 4%

U.S. inflation could push Bank of Canada to move policy rate higher than 4% — via financialpost News Economy Inflation BoC RateHike

While the growth of U.S. CPI slowed in August to an annualized pace of 8.3 per cent, down from 8.5 per cent in July, price pressures still clocked in hotter than economist expectations of 8.1 per cent. The release sent stocks plunging the most since 2020 and have prompted economists on both sides of the border to revise their rate-hike expectations for the rest of the year, with some predicting interest rates will move north of the four per cent mark.

Economists at the Toronto-Dominion Bank also revised their rate-hike expectations this week, moving estimates for the terminal rate — the maximum rate the central bank is expected to hit in its rate-hiking cycle — from 3.5 per cent to four per cent in their base-case assumption. In a Wednesday note to clients, TD chief Canada strategist Andrew Kelvin noted that a terminal rate as high as 4.75 per cent was also plausible.

dropped below the eight per cent mark to an annualized pace of 7.6 per cent, largely due to falling gasoline prices. August CPI figures for Canada are expected next week.Article content

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