National Bank of Canada (NBC) analysts Ethan Currie and Taylor Schleich expect the Bank of Canada (BoC) to keep its overnight target at 2.25%, extending a fourth consecutive hold. They see policymakers reiterating that policy is appropriately calibrated, looking through the war-driven headline Consumer Price Index (CPI) spike as soft core inflation persists, while modestly downgrading Gross Domestic Product (GDP) and marking up the all-items inflation outlook.

BoC seen holding as risks diverge

"The Bank of Canada is set to leave its overnight target unchanged at 2.25%, a decision widely expected by forecasters and OIS markets. This would mark the fourth consecutive hold after policymakers first declared in October that policy is at “about the right level” to keep inflation near target and support the economy’s transition."

"Traders have stripped out the three hikes that were (briefly) priced for 2026, but a tightening bias clearly remains. We don’t expect Governing Council to explicitly endorse this, instead reiterating that policy is appropriately calibrated. They will continue to look through the war’s “immediate” impact on inflation while also assuring that they will not let higher energy prices spread or become persistent inflation."

"Despite the surge in gas prices, recent inflation data has been encouraging as underlying price pressures continue to cool. For now, soft core inflation supports looking through the headline CPI spike."

"In an updated MPR, expect the all-items inflation outlook to be marked up reflecting higher gas prices. However, revisions to core inflation projections should be minimal. The GDP growth profile is likely to be downgraded modestly with Q4:2025 performance weaker than expected, Q1:2026 tracking below earlier estimates and the labour market underwhelming. The Bank may note that risks to growth are skewed lower and risks to inflation are skewed higher."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)