the bank of canada will raise borrowing costs by another 25 basis points in coming months before capping its tightening cycle economists said canada’s central bank will increase its key overnight rate to 5 in the third quarter according to a monthly bloomberg survey of 25 economists that would be the highest level since 2001 the outlook still more or less shows the economy headed for a socalled soft landing as policymakers push rates deeply into restrictive territory analysts raised their expectations for growth in 2023 to 13 from 1 previously and trimmed forecasts for next year to 07 inflation is expected to run at a 3 annual pace to end the year from a 27 clip expected in the previous survey the results underline the challenge faced by economists as they try to pinpoint the end of governor tiff macklem’s hiking campaign in the last year expectations for the country’s terminal rate have been consistently revised upward as surprising economic growth and robust household consumption defy the widely held belief canada is more sensitive to higher interest rates than its peers central bankers around the world are facing similar challenges as inflationary pressures prove stickier even in the face of aggressive tightening in the us economists expect the federal reserve will cap out at 55 and investors are betting the bank of england will go as high as 625 markets see the final bout of tightening happening in canada as early as the central bank’s next meeting on july 12 with overnight swaps traders putting the the odds of a move then at about 75 economists also pushed back their estimates for when canada’s growth will start slowing though a technical recession has reemerged as the base case for canada’s economy this year gross domestic product is expected to contract in the second half of 2023 shrinking by 01 and 02 annualized in the third and fourth quarters respectively macklem and his officials raised borrowing costs to 475 earlier this month the surprise move ended a conditional pledge the bank made in january to pause and assess how the more than 400 basis points of tightening in less than a year would impact canada’s economy