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The Organisation for Economic Co-operation and Development expects the Bank of Canada to raise its policy interest rate to 4.5 per cent in 2023, a higher forecast than many economists who expect the rate to peak at four per cent.
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The OECD cut its forecast for global economic growth in a report on Monday and warned that inflation could push major economies into recession.
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Global growth is now projected to slow to 2.2 per cent in 2023, down from a June forecast of 2.8 per cent.
The OECD also cut its forecast for Canada’s GDP growth by 0.4 per cent to 3.4 per cent in 2022 and to 1.5 per cent in 2023, down 1.1 per cent from its earlier forecast.
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“The global economy has lost momentum in the wake of Russia’s unprovoked, unjustifiable and illegal war of aggression against Ukraine. GDP growth has stalled in many economies and economic indicators point to an extended slowdown,” OECD secretary-general Mathias Cormann said in a statement.
The OECD said further policy rate increases are needed in most major advanced economies to reduce inflation and these will likely involve a period of “below-trend growth.” Policy rates are projected to rise 4.5 to 4.75 per cent in the United States, 4.5 per cent in Canada and 4.25 per cent in the United Kingdom because of the labour market pressures in these countries, the agency said.
The Bank of Canada’s current rate in 3.25 per cent.
