The OECD expects the Bank of Canada to raise interest rates to 4.5% in 2023

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The OECD expects the Bank of Canada to raise its key rate to 4.5% in 2023, a higher forecast than many economists who expect the rate to peak at 4%.

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The Organization for Economic Co-operation and Development cut its forecast for global economic growth in a report released today and warned that inflation could push major economies into recession.

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Global growth is now expected to slow to 2.2% in 2023, down from a June forecast of 2.8%.

The OECD also cut its GDP growth forecast for Canada from 0.4% to 3.4% in 2022 and 1.5% in 2023, down 1.1% from its previous forecast.

“The global economy has lost momentum as a result of Russia’s unprovoked, unjustifiable and illegal war of aggression against Ukraine. GDP growth has stalled in many economies and economic indicators point to a prolonged slowdown,” OECD Secretary-General Mathias Cormann said in a statement.

The OECD said further increases in policy rates are needed in most major advanced economies to reduce inflation and are likely to imply a period of « below-trend growth ». Policy rates are expected to rise by 4.5-4.75% in the United States, 4.5% in Canada and 4.25% in the United Kingdom due to labor market pressures in these countries, said said the agency.

The current Bank of Canada rate is 3.25%.