On September 7th, the Bank of Canada increased their rate by another 0.75% which was not surprising. Two of the big six banks (CIBC and National Bank) were not anticipating any further increases in 2022, while the other four (RBC, Scotia, TD and BMO) had forecasted another 0.25% increase in the fourth quarter.  Where they were all in agreement is that they weren’t expecting any further increases in 2023.

But then the Bank of Canada stated in their recent announcement that their rate will need to rise further given the outlook on inflation. 

The question is, will another 0.25% be enough to do it?  Or will they need to be more aggressive?

And what are the odds that this rate increasing madness will continue?

 

New Rate Forecasts For 2022

Four of the big six banks have adjusted their forecasts following the September 7th rate announcement. National Bank, RBC and Scotiabank are now predicting a 0.50% increase in the fourth quarter. RBC is expecting another 0.75%.

If they end up being correct, then this means that the prime rate will increase to 5.95% or 6.20% by the end of this year.

The other two banks, TD and CIBC, have not revised their previous forecasts. At least, not yet. CIBC had accurately predicted the 0.75% increase on Sept 7th and was not expecting any further increases. TD predicted a 0.50% increase Sept 7th with another 0.25% in the fourth quarter of 2022.

 

Prime Rate Expectations For 2023

The good news is that forecasts from the big six are still not showing any increases for 2023.Even better news is that there are still cuts being predicted.

RBC is holding to their previous forecast that we will see a 0.25% rate cut in the fourth quarter of 2023.  National Bank is showing much more optimism and is now forecasting a 0.25% cut in the third quarter of 2023 with a 0.50% rate cut in the fourth. 

This can of course change at any time, but these are the current forecasts from the big six.

 

Conclusion

The past few years have been a hard time for anyone trying to play the rate prediction game as circumstances keep changing. No one has a crystal ball and all anyone can do is speculate.

One thing that can be accurately predicted is that inflation needs to be under control before the increases will stop. The Bank of Canada has stated on a number of occasions that they are prepared to do whatever it takes to make this happen. The next inflation report will be released in October. If the numbers are still rising, then we can likely expect another rate increase on October 26th which is looking more and more likely. 

Time will tell and anything can happen.