The Bank of Canada’s next rate hike: a toss-up between 25 and 50 bps

The Bank of Canada is widely expected to deliver its seventh consecutive interest rate hike at its rate decision announcement this week.

What’s less certain is the size of the move, with markets and experts split between a 25- or 50-bps increase.

“Policymakers have done little in recent weeks to provide any clarity here, and economic data has been yielding mixed messages,” economists from National Bank of Canada wrote in a recent research note.

“Stronger-than-expected jobs and GDP growth along with still-hot inflation contrasts with a rapidly deteriorating housing market, weak household consumption and forward-looking indicators suggesting inflation relief is coming,” they added.

An additional hike will bring the Bank’s overnight target rate to either 4.00% or 4.25%, and imply a prime rate of 6.20% or 6.45%—a level not seen since 2007.