While Bay Street is bracing for as many as seven interest rates hikes from the Bank of Canada this year, one influential economist is breaking away from that consensus, and said he thinks the central bank will only raise its benchmark rate two or three times at most.

Data tracked by Bloomberg shows investors have been betting the Bank of Canada will have to aggressively tighten monetary policy in order to tame inflation, which hit a three-decade high in January of 5.1 per cent on an annualized basis, driven by the gasoline, food and shelter categories.

But David Rosenberg, chief economist and strategist at Rosenberg Research & Associates, said the central bank will be “playing with fire if they raise rates more than a few times” and risk inverting the yield curve — which would flash warning signals about a looming economic contraction.

“You'll find other economists, [the Bank of Canada] and the [U.S. Federal Reserve] will find ways to dismiss the yield curve even though its predictive power is only 100 per cent in the post-World War II period in terms of predicting recessions,” he said in an interview Wednesday.

“I think we have to respect the quintessential leading indicator. It's extremely flat.”

Rosenberg argued most of the surge in consumer price growth over the past year or so has been caused by supply-chain challenges, so the Bank of Canada won’t need to hike rates as much as investors think to bring inflation back into its target range of one to three per cent.

“My sense is that inflation in the second half of the year is going to come down more rapidly than the typical research reports you read on Bay Street or Wall Street. And we've done the work on it. So it would be nonsensical for the bank to become overly aggressive,” he said.

“They'll raise rates two or three times and pause. And I actually think that'll be it for the cycle.”

Rosenberg said that considering supply-chain bottlenecks in the food industry and constrained oil production from OPEC, he’s “not surprised” at the pace of inflation; but he added that once the pandemic subsides, those pressures should ease — “it's just a matter of the timing.”

“There's no sense in driving a stake into the economy because of inflation,” he said.

“Maybe behind closed doors, [the Bank of Canada] feels we have to generate a demand contraction to deal with this inflation given how inelastic the supply curve is. I shudder to think there'll be a massive policy misstep, but the yield curve is telling you that there is no need for the central banks to go aggressively here,” he said.