Bank of Canada Stuck Between Trade War and Inflation

The Bank of Canada is set to hold its overnight rate at 2.25% for a seventh consecutive meeting, but this decision conceals a deepening disagreement among economists about what comes next.

A unanimous consensus of 35 Reuters economists expect the hold, but four major Canadian banks, BMO, CIBC, RBC, and TD, forecast that rates will remain at 2.25% through December 2026 before potentially increasing in 2027 if growth is sustained.

However, National Bank and Scotiabank break from this view, projecting that the Bank of Canada will raise its policy rate to 2.50% in October 2026 and 2.75% by year-end.

This split reflects a fundamental disagreement about which crisis should drive the Bank's decision-making calculus, the trade-war-driven contraction risk or the supply-side shock from energy-driven inflation.