Bank of Canada Hike Strategy May Be Limited by Soft Economy

The Bank of Canada's interest rate hike strategy may be limited by a soft economy in Canada. According to a report from Capital Economics, published on September 30, 2026, trade uncertainty and slowing immigration levels could hold back the central bank from too many hikes. The Bank has kept its benchmark rate at 2.25 per cent for all of 2026 as it assesses the impact of the US trade dispute and war in Iran.

Capital Economics predicts that the Bank will raise the policy rate to 2.75 per cent with a pair of quarter-point hikes starting next year, but will resist further increases to avoid hampering growth.

The report notes that financial markets have shifted towards expecting interest rate hikes sooner rather than later, due to high oil prices and concerns about persistent inflation.