In brief from a much longer report):
- Despite a clear, but temporary, negative impact of Omicron on economic activity, it is clear that inflationary pressures are larger than earlier assessed and require a more robust monetary policy response.
- In Canada, we expect a 25bps move on January 26 followed by 150bps of additional tightening for the remainder of the year, for a total increase of 175bps this year. The policy rate should hit 2% by the end of 2022. Despite that path, the real policy rate would remain negative through the year.
Despite the rate hikes Scotia expect inflation to remain "uncomfortably high through 2023".