Burleton: Case for Bank of Canada Rate Hike 'Not That Compelling'

TD's deputy chief economist Derek Burleton says the case for a Bank of Canada rate hike is 'not that compelling'. He believes investors may be getting ahead of themselves, expecting the central bank to follow the Federal Reserve's lead. However, TD's latest quarterly forecast argues that the market is overplaying its hand in pricing additional rate hikes.

Burleton pointed out that Bank of Canada Governor Tiff Macklem has stated that the central bank will do what's best for Canada. He also noted that the inflation gap between Canada and the US is significant, with core inflation remaining around 3% south of the border compared to closer to 2% in Canada.

Burleton thinks the Bank of Canada will 'sit on its hands', and TD expects only one rate hike in October. The bank's baseline scenario assumes existing tariffs remain in place, which keeps growth lower than expected.