The Bank of Canada holds its next rate announcement meeting on Wednesday, and all expectations are it will also hold its rate steady at 2.25%.
In a report , the C.D. Howe Institute’s Monetary Policy Council (MPC), comprised of the chief economists of the six largest Canadian banks, as well as six leading academic economists and financial market experts, went a step further, suggesting the bank will hold the rate steady through 2026.
The MPC describes itself as a shadow of the Bank of Canada’s Governing Council, providing an “independent assessment of the monetary stance needed to achieve the bank’s 2% inflation target.”
All nine MPC members called for the bank to hold the overnight rate target at 2.25% on Jan. 28 as well as at the next announcement in March.
Eight of the nine called for a target of 2.25% in July, with one member calling for a cut to 2%. Looking to the end of the year, seven of the nine maintained the 2.25% will hold until January 2027, with one member calling for a target of 2% and another calling for a target of 2.75% by then.
“The consensus for no change in the overnight rate target in the near term and the relatively narrow range of recommendations six and 12 months ahead reflected the group’s judgement that the current stance of monetary policy and the economy were consistent with inflation converging with the 2% target over time,” reads the report.
In an RBC Economics report released Friday, economists Nathan Janzen and Abbey Xu said the bank signalled a holding pattern at its December meeting.
“Governor Macklem reiterated the BoC’s holding bias, contingent on moderate growth and stabilizing inflation,” they wrote. “Data since then have largely aligned with those expectations.'
"December labour market conditions improved moderately from a quarter ago, and while core inflation decelerated in December, it remains above the 2% target.”
Penelope Graham of Ratehub.ca says the signalling began before December.
“The Bank of Canada first established in October the narrative that it would hold rates for an extended period, a sentiment it doubled down on in its December announcement. This stance has only been further bolstered by the December inflation figures, as the headline number showed a 2.4% gain, up from 2.2% in November,” says Graham.
“However, that same report is more dovish than it appears on the surface, as the bank’s preferred core measures of inflation actually improved; this indicates that while price growth may be stubborn in the short term due to year-over-year baseline effects, underlying inflation is showing signs of cooling."
"Should this trend continue, along with additional signs of a weakening economy, the bank could be in a position to cut rates later this year, rather than hike.”
