{"id":72926,"date":"2026-05-04T11:59:14","date_gmt":"2026-05-04T11:59:14","guid":{"rendered":"https:\/\/www.pantheregroup.com\/2026\/05\/04\/posthaste-are-markets-right-about-bank-of-canada-rate-hikes-maybe-not\/"},"modified":"2026-05-04T11:59:14","modified_gmt":"2026-05-04T11:59:14","slug":"posthaste-are-markets-right-about-bank-of-canada-rate-hikes-maybe-not","status":"publish","type":"post","link":"https:\/\/www.pantheregroup.com\/2026\/05\/04\/posthaste-are-markets-right-about-bank-of-canada-rate-hikes-maybe-not\/","title":{"rendered":"Posthaste: Are markets right about Bank of Canada rate hikes? Maybe not"},"content":{"rendered":"<p> \n<br \/><iframe loading=\"lazy\" title=\"Bank of Canada signals rate hikes would be &#039;consecutive&#039;\" width=\"1080\" height=\"608\" src=\"https:\/\/www.youtube.com\/embed\/krmkk0iFVzs?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><img decoding=\"async\" alt=\"\" data-has-syndication-rights=\"1\" data-license-id=\"\" data-portal-copyright=\"\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2023\/01\/fp-posthaste-LOGO-01132023.jpg\" title=\"\" \/><\/p>\n<p> Bank of Canada watchers expected a firmer stand on inflation from the central bank after oil prices surged to US$100 in the Iran war, but even they were surprised at last week\u2019s hawkish tone. <\/p>\n<p> Not only did governor Tiff Macklem warn that interest rates could be adjusted \u201ceven if the economy evolves broadly in line\u201d with the bank\u2019s projections, he also said \u201cconsecutive increases\u201d may be needed if energy prices rise further and remain high. <\/p>\n<p> \u201cAt face value, this suggests our view that the bank will wait until 2027 to begin hiking rates is dead in the water,\u201d said Bradley Saunders, North America economist for Capital Economics. <\/p>\n<p> That\u2019s the view markets are taking. After the bank\u2019s decision to hold rates last week, market bets on rate hikes increased and are now pricing in almost two 25-basis-point increases by October. <\/p>\n<p> Many economists are sticking with their forecasts that the bank will stand pat this year, but they admit that the odds are rising that hikes could come sooner than expected. <\/p>\n<p> Capital thinks the Bank of Canada will keep its powder dry this year because a weaker economy will outweigh the threat of inflation. <\/p>\n<p> Canada\u2019s gross domestic product returned to growth in February, but the early estimate for March is flat, suggesting that a jump in oil and gas extraction that supported growth at the start of the year has since become a drag, said Saunders. <\/p>\n<p> Moreover, a third of consumers in the bank\u2019s own survey said they were cutting or postponing major spending because of the impact of the Iran war. <\/p>\n<p> \u201cAccordingly, we think the bank\u2019s forecast for GDP to rise by 1.5 per cent annualized in both the first and second quarter looks a little punchy,\u201d he said. <\/p>\n<p> The Bank of Canada may also be putting too much faith in promises of federal stimulus, said Capital. The latest monetary policy report cites government spending as a key reason to expect higher growth this year, but Ottawa\u2019s fiscal update last week showed little near-term stimulus beyond previously announced measures. New spending promised in November\u2019s budget focused on long-term investment. <\/p>\n<p> The economists also worry that the upcoming review of the Canada-United-States-Agreement could leave Canada worse off than it is now. The central bank\u2019s forecast depends on tariffs staying at current levels, but trade tensions between the two countries have been escalating. <\/p>\n<p> All of this leads Capital to believe that growth this year will amount to just 0.9 per cent, a ways below the central bank\u2019s forecast of 1.2 per cent. <\/p>\n<p> But then there\u2019s those skyrocketing oil prices \u2014 and the Bank of Canada faces a tricky navigation between the risks of a weak economy and runaway inflation. <\/p>\n<p> \u201c$100 per barrel WTI is not to be sniffed at \u2014 especially with food prices awkwardly high,\u201d said Saunders. <\/p>\n<p> The European Central Bank official said today a rate hike in June was \u201call but inevitable,\u201d if energy prices remain high, but Capital thinks the Bank of Canada will wait until at least July before committing. <\/p>\n<p> By then US$100 oil could be a thing of past. <\/p>\n<p> Mind you, that\u2019s a big if \u2014 and not all economists expect the bank to hold fire. <\/p>\n<p> Scotiabank Economics is calling for three hikes this year which would bring the interest rate to 3 per cent. <\/p>\n<p> \u201cSix more weeks of this and it will be harder for Macklem &amp; Co to sit tight,\u201d said Derek Holt, head of the Scotiabank\u2019s capital markets economics. <\/p>\n<hr \/>\n<p> <em><strong> Sign up here to get Posthaste delivered straight to your inbox.<\/strong><\/em> <\/p>\n<hr \/>\n<p> <strong><br \/> <img loading=\"lazy\" decoding=\"async\" alt=\"\" class=\"aligncenter size-full wp-image-1758646\" height=\"114\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2019\/02\/subhead_leading.png\" width=\"838\" \/><\/strong> <\/p>\n<\/p>\n<p><img decoding=\"async\" alt=\"\" data-has-syndication-rights=\"1\" data-license-id=\"\" data-portal-copyright=\"\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/05\/imf-chart-0504.jpg\" title=\"\" \/><\/p>\n<p> The Iran war is disrupting shipping and air-flight corridors that are critical for global energy and goods, and according to the International Monetary Fund there is \u201cno neat and clean return to the way things were.\u201d <\/p>\n<p> These IMF charts show why. In 2023, Houthi forces in Yemen attacked commercial ships passing through Bab el-Mandeb Strait forcing ships to reroute around the Cape of Good Hope in Africa. More than two years later traffic still remains at about half what it was before the conflict. <\/p>\n<p> Transport through the Strait of Hormuz and Middle East air flights have plummeted since the Iran war started in February, and if their recovery is as slow as the Bab el-Mandeb \u201cthe drag on growth will persist long after the fighting stops,\u201d said the IMF. <\/p>\n<hr \/>\n<p><img decoding=\"async\" alt=\"\" data-has-syndication-rights=\"1\" data-license-id=\"\" data-portal-copyright=\"\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2025\/07\/subhead-1.jpg\" title=\"\"><\/p>\n<ul>\n<li>Bank of Canada governor Tiff Macklem and senior deputy governor Carolyn Rogers appear before the House Standing Committee on Finance<\/li>\n<li><strong>Today\u2019s Data:<\/strong> United States factory and durable goods orders<\/li>\n<li><strong>Earnings:<\/strong> TMX Group Ltd., RioCan Real Estate Investment, Cargojet Inc., Tyson Foods Inc., Loews Corp., Berkshire Hathaway Inc.<\/li>\n<\/ul>\n<p><img decoding=\"async\" alt=\"\" data-has-syndication-rights=\"1\" data-license-id=\"\" data-portal-copyright=\"\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/02\/banner.jpg\" title=\"\" \/><img decoding=\"async\" alt=\"\" data-has-syndication-rights=\"1\" data-license-id=\"\" data-portal-copyright=\"\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/05\/chart-0504-ph.jpg\" title=\"\" \/><\/p>\n<figure class=\"embedded-image\"><\/figure>\n<hr \/>\n<p> <strong><img loading=\"lazy\" decoding=\"async\" alt=\"\" class=\"aligncenter size-full wp-image-3080181\" height=\"114\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/07\/subhead_reads.jpeg\" width=\"838\" \/><\/strong> <\/p>\n<ul>\n<li>The Carney government is circling closer to airport privatization and potential investors \u2018stand ready\u2019<\/li>\n<li>Trump adrift: The U.S. president\u2019s second term is at risk of foundering<\/li>\n<li>Did Andrew make a mistake in preventing his mom from buying annuities?<\/li>\n<\/ul>\n<hr \/>\n<p> <img loading=\"lazy\" decoding=\"async\" alt=\"\" class=\"aligncenter size-full wp-image-2059284\" height=\"114\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2020\/04\/subhead_personal_finance_2.png\" width=\"838\" \/> <\/p>\n<p> Sell in May, and go away; markets climbing the wall of worry \u2014 investing is full of rules of thumb like these, little snippets of advice designed to help you remember some rules and become a better investor. Investing columnist Peter Hodson takes a gut-check on five investing axioms to test how they stand up in the current market environment. Read more  <\/p>\n<hr \/>\n<p> <span><\/span><img decoding=\"async\" alt=\"\" data-has-syndication-rights=\"1\" data-license-id=\"\" data-portal-copyright=\"\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2025\/11\/FP-West-Energy-Insider-Logo.png\" title=\"\" \/> Interested in energy? The subscriber-only FP West: Energy Insider newsletter brings you exclusive reporting and in-depth analysis on one of the country\u2019s most important sectors. Sign up here. <\/p>\n<hr \/>\n<div class=\"x_elementToProof\"><span>Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at <\/span>wealth@postmedia.com<span><\/span><span> with your contact info and the gist of your problem and we\u2019ll find some experts to help you out while writing a Family Finance story about it (we\u2019ll keep your name out of it, of course).<\/span><\/div>\n<hr \/>\n<h2>McLister on mortgages<\/h2>\n<p> Want to learn more about mortgages? Mortgage strategist Robert McLister\u2019s Financial Post column  can help navigate the complex sector, from the latest trends to financing opportunities you won\u2019t want to miss. Plus check his mortgage rate page for Canada\u2019s lowest national mortgage rates, updated daily. <\/p>\n<hr \/>\n<h2>Financial Post on YouTube<\/h2>\n<p> Visit the Financial Post\u2019s YouTube channel for interviews with Canada\u2019s leading experts in business, economics, housing, the energy sector and more. <\/p>\n<hr \/>\n<p> <em>Today\u2019s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.<\/em> <\/p>\n<p> Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com . <\/p>\n<hr \/>\n<ul class=\"related_links\">\n<li>Toronto and Vancouver suffer from the housing headaches of &#8216;global city syndrome&#8217;<\/li>\n<li>Deficits are climbing across Canada, but this province is awash in red ink<\/li>\n<\/ul>\n<p> <em><strong>Bookmark our website and support our journalism:<\/strong> Don\u2019t miss the business news you need to know \u2014 add financialpost.com to your bookmarks and sign up for our newsletters here<\/em> <\/p>\n<p><\/img><br \/>\n<br \/>\n<br \/>Posthaste: Are markets right about Bank of Canada rate hikes? Maybe not<\/a><br \/>\n<br \/>2026-05-04 11:59:14<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Bank of Canada watchers expected a firmer stand on inflation from the central bank after oil prices surged to US$100 in the Iran war, but even they were surprised at&#8230;<\/p>\n","protected":false},"author":2,"featured_media":72927,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":{"0":"post-72926","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy"},"_links":{"self":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/72926","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/comments?post=72926"}],"version-history":[{"count":0,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/72926\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media\/72927"}],"wp:attachment":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media?parent=72926"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/categories?post=72926"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/tags?post=72926"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}