The rapid turnaround in the housing market and the upside surprise to CPI inflation in April have raised the case for another interest rate hike from the Bank of Canada, which we now judge is slightly more likely than not. The potential for US debt ceiling negotiations to go down to the wire, with negative effects for financial markets in early June, is one reason for the Bank to stay on the side-lines at its meeting next month. But we now anticipate another 25 bp hike in July and doubt the Bank will cut rates until 2024.
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