Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Canada's central bank must stay prepared to live up to its pledge of hiking interest rates again if inflation remains stubbornly high, the OECD said in an annual review of the nation's economy published Monday.
The Paris-based OECD sees inflation of 4% this year, faster than the Bank of Canada's forecast of 3.6% and said economic risks remain elevated amid the Ukraine war, volatile financial markets and heavily indebted Canadian households.
"The Bank should continue to shrink its balance sheet and stand ready to raise its policy rate as warranted to bring inflation sustainably back to target," according to the report being presented in Ottawa by Acting Chief Economist Alvaro Pereira and Senior Economist Philip Hemmings. The Bank's current policy is allowing maturing bonds to roll of its balance sheet, a process that will take years to unwind after the Bank deployed QE at the height of the Covid pandemic.
The OECD's advice comes two days before Governor Tiff Macklem is widely expected to keep the policy rate at 4.5% and affirm his intention to hold as long as the forecast for inflation to return to 2% next year is realized. The OECD predicts it will take until the end of 2024 for inflation to return to the Bank's target.
The report predicts the Bank will cut rates to about 3.8% by the end of next year. Economic growth will be 1.3% this year and 1.5% in 2024, slower than last year's pace of 3.6% as the economy re-opened, the OECD predicts. Unemployment is also predicted to be little changed at 5.3% this year and climb to 5.7% next year.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.