Economists in a recent poll see steady rates through 2026, with any surprise more likely a cut than a hike
Canadian interest rates look set to stay low and steady through 2026, shaping a long stretch of predictable funding and discount-rate conditions, according to a Reuters poll of economists.
The Bank of Canada will keep its overnight interest rate at 2.25 percent on January 28, all 35 economists in the January 20-23 Reuters poll predicted, and nearly 75 percent of them – 26 of 35 – forecast that the central bank will hold rates at that level through 2026.
This represents a larger majority than the just over 60 percent who expected that outcome in December.
The central bank has already cut rates by 275 basis points between June 2024 and October 2025, making it one of the most aggressive central banks among its G10 peers.
The overnight rate now sits at the low end of the 2.25 percent-3.25 percent range the Bank of Canada estimates as neutral, which it says neither stimulates nor restricts economic activity.
At its last decision, the Canadian central bank held its key rate at 2.25 percent and signalled an extended pause.
Since then, economic data have sent mixed signals, giving policymakers more reason to stay on hold.
According to Reuters, Canada’s job growth stalled in December after three straight monthly gains, pushing up the jobless rate, while inflation rose more than expected even though closely watched core measures fell.
Avery Shenfeld, chief economist at CIBC Capital Markets, told Reuters that “at this point, the BoC is ready to take a fairly long wait-and-see stance” and that any move this year is more likely a cut than a hike.
He said there is still “a lot of slack in the labour market,” uncertainty about the pace of expansion, and that rates are “not yet that stimulative.”
Canada’s economic growth is expected to have slowed sharply to an annualized pace of only 0.3 percent last quarter after growing 2.6 percent in the third quarter, the poll showed.
Poll medians point to growth gradually picking up pace to about a 2 percent rate of growth by the end of 2026. Growth will average 1.2 percent and 1.8 percent in 2026 and 2027, respectively, after a 1.7 percent rise last year.
RBC senior economist Claire Fan said the bank sees the economy “at a turning point for the better” because it is highly interest‑rate sensitive, and that past rate cuts will continue to support growth this year.
Canada’s inflation is forecast to remain around the midpoint of the Bank of Canada’s 1 percent-3 percent target range, according to Reuters, supporting the case for a lengthy pause with any move more likely to be a cut than a hike.
External risks still hang over the outlook.
The risk of renewed trade tensions with the US, Canada’s top export destination, argues for caution as the US-Mexico-Canada Agreement (USMCA) comes up for review in July.
Canada’s economy has stayed largely resilient despite US tariffs of 25 percent to 50 percent on some key sectors, including autos, lumber, aluminum and steel.
Avery Shenfeld told Reuters that CIBC’s base case assumes sectors with free trade access to the US keep it, either through a new deal or because talks drag on and the status quo holds.
He warned that if a broader range of industries is hit with tariffs, growth would slow and the BoC would likely need to cut rates further.
