MNI BRIEF: Canada PBO Says BOC Hikes to Blunt Fiscal Stimulus

Earlier Bank of Canada rate increases now seen starting in the second half of next year will offset some of the stimulus from government deficits, Parliament's independent budget office reported on Thursday.

The bank's rate will climb 50bp each year from 2022 through 2025, taking it to 2.25% according to estimates from the budget office, which before today didn't see increases starting until 2023. The PBO affirmed there's little chance of a balanced budget five years from now, calling for a CAD36 billion shortfall in the 2025-26 fiscal year equal to 1.2% of GDP, and a 35% chance the government will fail to meet its goal of lowering the debt-to-GDP ratio.

Former BOC Governor David Dodge criticized the government's record deficits in a recent interview with MNI, saying some economic assumptions were stretched and new spending will give little to economic growth.