After weeks of favourable predictions that the Bank of Canada would end its aggressive rate hike cycle, some in the industry are changing their tune, cautioning of possible further rate hikes on the horizon.

In a new report from BMO Economics, Chief Economist Douglas Porter notes that although the Bank of Canada may be finished hiking its policy rate, "the market is now giving high odds to one more move."

And Porter isn't entirely alone in his predictions. Derek Holt, Scotiabank’s Vice-President and Head of Capital Markets Economics said late last week, in a piece for The Globe and Mail, that although a rate hike in March is “out of the question,” we shouldn't "rule out a return with another hike as soon as April.”

Both Ipsos Senior Vice President Sean Simpson and Toronto Regional Real Estate Board (TRREB) Chief Market Analyst Jason Mercer referenced these newer predictions during TRREB's 2023 Market Outlook Event held on Friday, explaining how they could come to fruition. Largely, Mercer says, the likelihood of a rate hike will be tied to how job performance and consumer spending trends play out in the near term.

"It's really going to be a balancing act," Mercer said. "On the one hand, if you look at overall economic growth in Canada, that's started to moderate, yet we're still seeing firms bring on new employees. Part of that has to do with the fact that there's so many job vacancies right now [...] and so the question is going to be if a firm brings on these new employees, but because of some hesitancy, higher borrowing costs, and what have you, are you not going to see a huge uptick in consumer spending? Well, then that won't have as much of an impact on on inflation, versus if we see jobs continue to increase and we see consumer spending increase in lockstep and that could be inflationary, and that would pose a risk for continued rate hikes."

This rhetoric is a noticeable shift from the general narrative that's been flouted by many industry leaders in recent weeks, predicting that the bank's January rate hike, which brought the BoC policy rate to 4.5%, would be its last before cutting rates later this year.

During the rate announcement, even the BoC itself confirmed this stance, saying “If economic developments evolve broadly in line with the MPR outlook, Governing Council expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases.”

The BoC did add a caveat that the Governing Council will increase rates further if necessary, but went on to say that “inflation is projected to come down significantly this year," indicating a low likelihood of another hike.

Mercer acknowledged the bank's position, but noted that "they'll have to take a bit of a wait and see attitude to see how things pan out," adding, "I think one month's data probably won't be enough to sway them, but it's certainly going to be something they're keeping an eye on."

Canada's sky-high inflation -- the prime target of rising interest rates -- appears to have peaked, having dropped to 6.3% last month -- its lowest level since February 2022. Although this marked yet another month of lower inflation, the 6.3% is still a far cry from the BoC's target of 2%.

Even still, many are forecasting rate cuts in 2023. Earlier this month, the BoC published the results of its Market Participants Survey, based on responses from roughly 30 financial market participants, including senior economists and strategists at banks, pension funds, asset management firms, and insurance companies. The median response from participants was an expectation that the BoC will cut interest rates by 25 basis points in October and again in December, bringing the policy rate down to 4% by the end of the year.

These conflicting, and often quickly changing, forecasts can be understandably confusing to consumers and, frankly, all go to show that predictions are exactly that -- predictions. There's anything but certainty to be had when it comes to ever-changing market conditions, and there's likely to be a flurry of opinion shifts ahead of the next interest rate announcement, scheduled for March 8.