Scotiabank sees Bank of Canada increasing before year’s end
“The economy is beginning to emerge from its recent soft patch,” the report said, pointing to April GDP growth of 0.5%, matching the earlier flash estimate, and labour market data that suggest the anticipated recovery may be arriving somewhat sooner than expected.
Scotiabank projects growth accelerating to 2.2% in 2027 as the cumulative effects of past rate cuts work through the housing sector and government outlays catch up with planned spending.
The more consequential signal for Canadian mortgage professionals is the bank’s inflation outlook. “Inflation risks remain elevated in our view, which should keep the Bank of Canada cautious and ultimately lead to a gradual normalization of policy rates beginning toward the end of this year,” the report said.
Underlying cost pressures — measured through unit labour costs, producer price index data, and the bank’s own underlying cost index — “continue to point to elevated inflation risks,” the report said, adding that monthly core inflation measures have rebounded after a string of softer readings.
A pressure cooker building in the second half
Derek Holt, senior vice-president and head of capital markets economics at Scotiabank in Toronto, has been the most vocal proponent of this view among Bay Street economists.
