MONTREAL: The Bank of Canada (BoC) will raise interest rates by 25 basis points on March 2, earlier than previously thought and ahead of the United States Federal Reserve (Fed), according to economists surveyed in a Reuters poll, which also showed expectations that rates will be higher by year-end than previously thought.

       Just one month ago, economists predicted the BoC would wait until the second quarter to hike rates. But persistently higher inflation, which accelerated to a 30-year peak in January, prompted them to bring forward expectations.

       Other major central banks, including the Fed and the Bank of England, are also expected to raise rates in March to tackle inflation which is at multi-decade highs, with some economists calling for an aggressive 50-basis-point move by the Fed.

       The poll, which was conducted Feb 17-23, found only a 20% median probability of a 50-basis-point rate rise at the BoC’s March meeting, with all 25 economists predicting a 25-basis-point hike to 0.50%.

       “I would say they’re not behind the curve because inflation expectations are well-anchored,” said Andrew Kelvin, chief Canada strategist at TD Securities.

       “I think that’s probably the best way of framing this. But it is imperative they do hike rates now because if they wait any longer, they will be behind the curve.”

       BoC deputy governor Timothy Lane said last week there was a risk inflation could continue to be more persistent than forecast, adding that the central bank would be nimble and potentially “forceful” in tackling it.

       This would set the stage for a possible aggressive campaign of interest rate hikes. — Reuters