BMO Economics has reaffirmed its prediction that the Bank of Canada will maintain its policy rate at 2.25% through 2027, despite acknowledging an increasing risk of rate hikes. The bank's latest forecast comes as markets anticipate three quarter-point increases by July 2027, with the first expected as early as January. BMO highlighted concerns over weaker employment and inflation risks stemming from high energy prices and tariffs.
Other major banks have revised their forecasts since July. Scotiabank now expects the rate to hit 2.50% by year-end, down from its previous forecast of 2.75%, but anticipates a rise to 3.25% by the second quarter of 2027, up from 3.00%. CIBC has also adjusted its outlook, forecasting 2.50% in the first quarter of 2027 and 2.75% in the second quarter, both 25 basis points higher than its July projections.
For Government of Canada five-year bond yields, the six banks' forecasts range from 3.05% to 3.55% in the fourth quarter of 2027, compared to approximately 3.59% at midday on October 14, 2026.