September has arrived and the central bankers are back from their summer vacations. With that they will resume setting interest rates and fighting inflation.

The Bank of Canada, the U.S. Federal Reserve and the European Central Bank are all making rate announcements this month. Market watchers are forecasting increases across the board. The questions of how big they will be and how many more are coming, are the topics of lively debate.

Here in Canada the majority position puts the increase at either 50 basis points or 75 basis points. There are a few outliers who think the Bank could surprise with another full percentage point increase.

(Projections for Europe and the U.S. fall within the same range.)

Any increase at the higher end of the range would push the BoC’s trend-setting overnight rate out of its neutral zone and into restrictive territory. The Bank considers a 2% to 3% rate to be neutral; it neither enhances nor restricts economic growth. A 75 bps increase would bump the overnight rate to 3.25%.

After this week analysts, generally, expect to see one more rate hike by the end of the year, putting the overnight rate at 3.50%. There are settings scheduled for October and December.

At the same time there are those who expect this week’s increase to be the last. Big bank economists Benjamin Tal and Karyne Charbonneau are forecasting a 75 pbs hike and then a pause until the end of 2023. That forecast appears to be based on the idea that the heavy debt loads being carried by Canadian households are amplifying the effects of interest rate increases and inflation.

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