Canada Rate Hike Risks Shift Toward Earlier Tightening

The Bank of Canada's interest rate path is being reevaluated by markets, with some analysts predicting earlier hikes. Royal Bank of Canada (RBC) notes that policymakers are focused on inflation passthrough from higher energy prices.

RBC's base case is for gradual hikes starting in early 2027, but risks are shifting toward earlier tightening. This comes after the Federal Reserve raised rates for the first time since 2023.

Bank of Canada Governor Tiff Macklem is set to speak on economic developments on Monday, which could provide some additional guidance ahead of its interest rate decision on October 28.