Business · Economy · 5 hrs ago
Economists underestimated the chance of a Bank of Canada rate hike
Economists had mostly expected the Bank of Canada not to raise rates this year.
The bank raised rates anyway, prompting a reassessment of those forecasts.
Forecasters pointed to contained core inflation and a weakening labour market as reasons a hike was unlikely.
They also cited tariff uncertainty, energy shocks and tighter bond markets.
Those arguments did not prevent the rate increase, showing how uncertain interest-rate predictions can be.
The commentary says borrowers could lose money if they rely too heavily on confident forecasts.
It does not say what the bank will do next.
Economists largely gave too little weight to the chance of a Bank of Canada rate hike this year.
The hike happened after months of predictions that it would not.
Robert McLister says economists cited contained core inflation, a deteriorating labour market and tariff uncertainty as reasons against a hike.
Other arguments included looking through energy shocks and the claim that rate hikes could not solve energy shortages.
McLister frames his analysis as a post-mortem intended to help borrowers avoid costs.
- Who
- The Bank of Canada. Robert McLister discusses economists’ predictions.
- What
- The Bank of Canada raised interest rates, contrary to the expectations of many economists. The size of the increase is not stated.
- When
- This year; the exact date is not stated.
- Where
- Canada.
- Why
- The sources do not state the Bank of Canada’s reasons for raising rates.
This story does not have two clearly opposing sides.
The economic establishment largely gave insufficient credibility to the chance of a Bank of Canada rate hike that year.
The Bank of Canada raised rates.
- Country
- Canada
- Institution
- Bank of Canada
- Rate decision
- A rate hike happened this year
- Economists’ expectation
- Many gave the chance of a hike insufficient credibility
- Article author
- Robert McLister
What people are saying
predicting interest rates is a sport where confidence is abundant and track records are not.
We heard almost every reason in the book why a hike wouldn’t happen — and then it happened