Burleton: No Rate Hikes Expected from Bank of Canada

Derek Burleton, TD Bank Group's vice-president and deputy chief economist, expressed skepticism about market expectations of a rate hike by the Bank of Canada. He stated that markets are pricing in four or more hikes, but his baseline calls for none. Burleton believes the central bank will be able to maintain its current policy rate of 2.25%, and if it does decide to raise rates, he expects only one or two small increases.

The market's assumption is that Canada will follow the US Federal Reserve's lead in raising interest rates, but Burleton argues that the two economies are in different places. He noted that US core inflation is running above 3%, while Canada's is close to the Bank of Canada's 2% target.

Burleton also pointed out that Canadian yields have climbed about 80-85 basis points since their February lows, which is gradually affecting fixed mortgage rates across the country. He warned brokers to be honest with borrowers and not promise unrealistic rate expectations.