Another forceful rate hike coming

We expect the Bank of Canada to hike its policy rate by another 50bp next week, to 1.50%, and to drop a heavy hint that a final 50bp hike is coming at the following policy meeting in mid-July. We expect the Bank to revert to 25bp hikes after that, however, as inflation drops back and it becomes clear that a more severe downturn in housing is developing. As economic growth slows to well below the Bank’s optimistic forecasts in the second half of this year, we expect it to move to the side lines later this year, with the policy rate peaking at 2.5%, the mid-point of the 2% to 3% neutral estimate range.