Reining in government spending could take some of the pressure off the Bank of Canada in tamping down inflation and help limit pain for debt-ridden Canadians, according to a new report from CIBC.
The central bank’s return to rate hikes last week with a 25-basis-point increase has economic forecasters hurriedly revising their outlooks for inflation and interest rates, with CIBC also turning its lens on the role played by fiscal policymakers.
In the report released Monday from chief economist Avery Shenfeld and senior economist Andrew Grantham, CIBC forecasts another rate hike of a quarter percentage point from the Bank of Canada in July or September, which would bring the policy rate to 5.0 per cent.
Rate cuts, meanwhile, aren’t expected to come until June 2024, according to CIBC forecasts. The central bank policy rate is projected to fall to 3.5 per cent by the end of next year, CIBC predicts.