Overnight Rate Hike – When? (Prediction Roundup)

The last time we read: “Bank of Canada increases overnight rate target” was back in September 2010.   It has remained unchanged at 1% ever since.

Correctly predicting when the Bank of Canada will raise the rate has been elusive.  This previous roundup from 2011 shows just how difficult a task it has been.

Below is the most current predictions from the Big 5 and the OECD which range from this May to not anytime before 2016.

Rate hike: May 2015 
Prediction date: November 25, 2014
“The timing and pace will depend on economic developments, but it is assumed in this projection that the first policy rate increase in late May of 2015 and that the rate rises steadily thereafter.” (Source)

Rate hike: Q3 2015
Prediction date: December 8, 2014
First 0.25% rate hike will be in the third quarter of 2015 and another 0.25% uptick the following quarter where it will pause at 1.5% into 2016. (Source)

CIBC rate outlook (click to enlarge image)

CIBC rate outlook (click to enlarge image)

Royal Bank
Rate hike: Q3 2015
Prediction date: December 12, 2014
RBC is projecting no overnight rate hike until Q3 2015, afterwards 0.25% increase every QTR for the following year, and then a 0.5% jump in Q3 2016 (Source)

RBC interest rate outlook (click to enlarge)

RBC rate outlook (click to enlarge)

TD Bank
Rate hike: Q4 2015
Prediction date: December 10, 2015
“In addition to focusing on these key risks, the FSR dedicated significant discussion to the negative impacts that higher long term rates could have in terms of causing the risks to be realized. This suggests that despite a string of recent positive economic data, the Bank of Canada is likely to be cautious in raising rates. As a result, we continue to expect the Bank of Canada to keep the policy rate unchanged until the final quarter of 2015.”  (Source)

Rate hike: Q4 2015
Prediction date: December 12, 2014
BMO forecasts no hike in the overnight rate until Q4 2015, followed by 0.25% every QTR until at least Q3 2016 (Source)

BMO rate outlook (click to enlarge)

BMO rate outlook (click to enlarge)

Rate hike: not before 2016
Prediction date: December 5, 2014
“[Poloz is] likely to take the message that, contrary to the OECD’s forecast, he is nowhere close to raising interest rates.  Our view remains that the central bank will be on hold throughout at least all of next year.” (Source)

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