CIBC didn’t change its forecast for a terminal rate of 4.25% from the Bank of Canada in light of today’s hike to 3.75% versus 4.00% expected but they did note lower growth estimates.

“The statement and downgraded growth forecasts within the MPR hint at an economy that is losing momentum maybe a
little quicker than previously anticipated. Housing is seen to have retreated ‘sharply’ but there was also reference to
consumer and business spending softening, as well as weaker international demand,” economists wrote.

The question beyond the terminal rate — which now looks like it will be 4.25% or 4.00% — is how long the Bank of Canada will stay there.

“While the Bank of Canada slightly under-delivered today in terms of the size of rate hike
delivered, its downgraded view of potential growth and continued commitment that interest rates ‘will’ need to rise further
doesn’t suggest to us that the peak in interest rates will be any lower than we were expecting heading into today’s
announcement. The press conference opening statement suggested that we are getting closer to the end of the hiking
cycle and that, barring a large surprise, steps of 75bps are now behind us. This is consistent with our forecast of a peak
rate of 4.25%, and that rates will have to stay at that level at least through the end of 2023 to help bring inflation back
down to target.”

CIBC also noted that the BOC would be comforted by the rebound in the Canadian dollar. It fell a full cent on the announcement but has since recovered and is higher on the day (thanks in part to oil).