Bond yields, which directly affect fixed-rate mortgages, have increased as the Bank of Canada gears up to tighten its monetary policy, and a report from RBC Economics anticipates more of the same this year.

RBC believes both the Bank of Canada and Federal Reserve, from which the former takes its cue, will raise interest rates by 100 basis points beginning next month, but official quantitative tightening (QT) announcements aren’t expected until spring.

Although nothing too aggressive is on the horizon, according to RBC, the Bank of England has already commenced its QT cycle with faster-than-expected rate hikes, although it has since conceded that it might have jumped the gun a little. The European Central Bank, meanwhile, has become hawkish and has indicated that it will dial back stimulus.

Read: Could Rate Hikes Lead to a 20% Drop in Home Prices?

Although Canada’s central bank opted not to raise its overnight rate last month, it signalled that its rate hiking campaign is nigh, likely beginning in March, which is earlier than RBC had initially projected. The Federal Reserve appeared the most hawkish in not ruling out an aggressive QT campaign, RBC added.

And while the Bank of England increased rates this month, the European Central Bank, worried by rising inflation, appears ready to wind down its quantitative easing (QE) program next month, paving the way for rate hikes this year. RBC has moved forward its forecast for the Reserve Bank of Australia’s rate hiking campaign to this year following the conclusion of its QE campaign this month.

Central banks’ policy pivots have sparked some volatility in the market, with the S&P 500’s 5.3% drop in January going down as the worst since March 2020 when the COVID-19 pandemic began. The VIX volatility index also reached a one-year high last month. Adding to instability are geopolitical tension involving Russia, Ukraine, the US, and possibly China, and escalating petrol prices — the latter inflaming inflation.