BMO Sticks with Dovish Rate Forecast Through 2027

BMO Economics has maintained its forecast that the Bank of Canada will keep its policy rate at 2.25% through the end of 2027, despite stronger-than-expected economic growth and market pricing that points to a possible rate increase by January.

This forecast is unchanged from BMO's previous rate outlook, keeping the bank alongside TD as the most dovish of the Big Six forecasters.

Other major banks expect the Bank of Canada to begin raising rates between late 2026 and mid-2027. However, BMO notes that subdued underlying inflation and heightened U.S. trade uncertainty continue to offset signs of improving economic activity.

The bank is now tracking annualized economic growth of 3.8% in the second quarter, compared with the Bank of Canada's 2.5% projection.