Canadian Interest Rate Forecast July 2015

On the eve of the Bank of Canada's decision to lower their overnight rate target, we provide a summary of the most recent available interest rate forecasts for the 5-year government of Canada bond yield.

Canadian interest rate forecast summary

  • There is a little more variation in the near-term forecasts than usual. This stems from a substantial amount of new, relevant statistics coming to light in between different forecast releases;
  • The consensus forecast is for a rise of 105 basis points by the end of 2016
  • Central1 continues to call for significantly lower interest rates when compared to other forecasters. This was the case in our last forecast summary as well

Upward bias in Canadian interest rate forecasts

  • If you have seen our previous Canadian interest rate forecast summaries, you will notice one thing: a consistent upward bias in interest rate forecasts. The graph above illustrates this well;
  • The consensus forecast has consistently been for a roughly 1 percentage point increase in the 5 year government of Canada bond yield in one year's time
  • The consensus forecast has also consistently been wrong.

It may be the case that the Bank of Canada raises rates tomorrow. We are, after all, under the threat of a recession. It should be noted, however, that the efficacy of an interest rate cut is not what is was several years ago. Furthermore, we would argue that an interest rate cut is unlikely to have a substantial affect on most Canadians