Given all this uncertainty, the right thing for the Bank of Canada to do is stand pat, said one economist
The Bank of Canada held its benchmark lending rate at 2.25 per cent on Wednesday, but economists are split on the outlook for this year and 2027 due to the threat of inflation spreading and the effect of tariffs on growth.
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Here’s a look at what some of them are forecasting.
“Confronted with another spike in oil prices and a fresh wave of U.S. protectionism, Canadian central bankers remained firmly on the sidelines, highlighting their difficult balancing act,” Royce Mendes, managing director and head of macro strategy at Desjardins Group, said in a note.
Despite the turbulence, Canada’s economy grew 3.3 per cent on an annualized basis in the second quarter, and he said the central bank has indicated it doesn’t think the latest round of United States tariffs poses a threat to gross domestic product, especially since Ottawa announced a series of support programs to buffer some of the effects.
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Mendes said the Bank of Canada appeared to suggest the greater threat lies with inflation from higher fuel prices that could spread to other parts of the economy.
All this adds up to a “more hawkish tone” from policymakers, he said.
Desjardins expects the Bank of Canada to leave rates on hold for the rest of the year and then hike them by 50 basis points to 2.75 per cent in the first half of 2027.
