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Bank of Canada to hike rates by 50 basis points this week, says INGThe Bank of Canada is likely to hike interest rates by 50 basis points this week, with quantitatve tightening on the cards, said James Knightley, Chief International Economist at ING, in a preview research note.The heavily-disrupted global supply chains from the pandemic have been distorted further by the Russia-Ukraine war in the form of sharply rising energy costs pushing up inflation higher globally, with price pressures in Canada rising sharply.That has led expectations for the BoC to react faster than previously thought. In March, the BoC hiked by 25 basis points, taking its key rate to 0.5 per cent, its first lift-off since October 2018. While expectations were for rates to firm, the Canadian central bank is likely to raise rates more faster than previously thought to control spiraling inflation.Those expectations come when the US Federal Reserve is also forecast to take rates higher by 50 basis points in April.”Canada has recovered all output lost during the pandemic while employment is at all-time highs and inflation is running at the fastest rate since 1991. A 50bp rate hike and quantitative tightening are on the cards,” said ING’s Mr Knightley. “The Bank may also announce quantitative tightening (QT) next week. Comments from BoC Governor Tiff Macklem in March indicated that BoC may simply end reinvestments of maturing assets rather than the US Federal Reserve’s proposed ‘phased in’ caps for what is allowed to roll off the balance sheet,” he added.If the BoC does raise rates by 50 basis points this week, it will be the first similar quantity lift-off since May 2000.”We expect the strong growth, strong jobs, strong property market and ongoing inflation risks to result in BoC hiking rates to 2.75 per cent by year-end, from the current 0.5 per cent level, with risks skewed to the upside,” added Mr Knightley.

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