Bank of Canada: Policy seen on hold through 2026 – RBC

Royal Bank of Canada (RBC) economist Claire Fan notes that the Q2 2026 Bank of Canada Business Outlook Survey showed resilient sales and investment expectations despite earlier Oil price shocks. With Canadian growth picking up and core inflation still subdued, Fan argues the Bank of Canada (BoC) has little reason to change course and is likely to keep interest rates unchanged through 2026.

Rates expected to stay unchanged

"With economic growth picking up in Q2 after Q4-Q1 stagnation, and core inflation pressures remaining subdued in latest May, the case for BoC to move in either direction is weak."

"We continue to expect the central bank will opt to leave interest rates unchanged through 2026."

"The Q2 Bank of Canada Business Outlook Survey was conducted in May amid high oil prices due to conflict in the Middle East."

"Against that backdrop, results reflected the expected rising price expectations but stable longer-run (5-year) inflation expectations among businesses, as well as overall resilient sales and investment expectations at the time."

"The separate Canadian Survey on Consumer Expectations (CSCE) showed energy prices cutting more significantly into household spending plans in Q2."

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