3 January 2019

Following years of stimulating monetary policy and historically low interest rates supporting the economic conditions, the Bank of Canada started raising rates in July 2017.

Since then, the rate was raised four times to the current 1.75%, and many specialists expect more hikes in 2019.

Capital Economics points to the fact that oil prices fell by 40% recently, and the BoC “seriously underestimated” the consequences of the previous decline, so it could be the same this time.

“We can already see that the oil prices drop affects Canada negatively”, – Capital Economics says, adding that the number of active oil rigs went down by 20% on a year-over-year basis last month,

Moreover, slowing consumer spending and a cooling national housing market also make Capital Economics believe that the Bank will change its hike plans at least once at the end of the year.