Economists at RBC, TD expect the BoC to hold rates steady this week, putting the focus on their diverging views about how long borrowing costs will remain restrictive
The Bank of Canada is poised to extend its rate pause this week, leaving investors focused less on the headline decision and more on what policymakers signal about the path ahead.
At its first meeting of 2026 on Wednesday, the central bank is widely expected to keep the overnight rate unchanged, following a cumulative 100-basis-point easing cycle in 2025 and back-to-back meetings on hold.
RBC Economics’ Rishi Sondhi notes that recent data have broadly matched the Bank’s expectations for moderate growth and easing, but still elevated, inflation pressures. The Bank’s December communication emphasized a bias to hold, conditional on the economy behaving roughly as forecast, and incoming numbers since then have not been enough to force a rethink.
Market participants will therefore scrutinize the accompanying Monetary Policy Report for updated projections on growth, inflation and the output gap. Sondhi anticipates only modest forecast revisions and a continuation of what he describes as a “cautiously optimistic” narrative for a gradual recovery through 2026, rather than a pronounced acceleration. He also points to the latest Business Outlook Survey, which showed improving sentiment late last year but demand conditions still soft enough to curb firms’ pricing power.
BMO Capital Markets likewise expects a steady policy rate and a continuation of Governor Tiff Macklem’s neutral stance.
Benjamin Reitzes argues that, although some indicators have softened since the December meeting, the shift has not been “material” in the way the Bank has defined as necessary to move off the sidelines. The economist highlights subdued business investment intentions, trade-related uncertainty tied to looming USMCA renegotiations, and a labour market that is starting to show more caution in hiring and an uptick in layoff plans.
On inflation, the picture is complex but generally supportive of patience rather than urgency. BMO points to headline consumer price growth that has been buffeted by tax-related base effects and the reversal of prior policy changes, making the BoC more reliant on its preferred core measures. Those core indicators have been drifting lower on a short-term basis, with six‑month annualized readings for CPI‑trim and CPI‑median near the 2 per cent target.
