Corpay chief market strategist: investors may be underestimating the impact of rate hikes on the Canadian economy

Investors may be underestimating the impact of interest rate hikes on the Canadian economy, says Karl Schamotta, chief market strategist at forex firm Corpay. They don't expect much difference in interest rate policy between the Federal Reserve and the Bank of Canada. Based on overnight index swaps, investors expect the Fed and Bank of Canada to cut rates six times over the next two years, meaning spreads will stabilize at current levels.Schamotta argues that longer-term interest rate rises will be a worse drag on consumer spending in Canada than in the U.S., and says housing-market activity is likely to stagnate for some time. He expects the Bank of Canada to cut rates frequently, forcing traders to reassess their interest rate outlook.