Canada's Rate Hike Cycle May Begin in Early 2027, RBC Economists Warn

RBC economists are warning that Canada's interest rate cycle may be nearing its end, and the Bank of Canada (BoC) could soon begin a gradual hiking cycle. According to RBC assistant chief economist Nathan Janzen and senior economist Claire Fan, the BoC will likely hold its policy rate steady in the near term before increasing it in early 2027.

The economists point to two factors that support their view: the structural impact of US tariffs on Canadian imports, which could halve Q4 GDP growth to below 1% annualized, and elevated global oil prices, which have kept policymakers alert to any broadening in price pressures. The BoC views targeted federal fiscal support as a more effective instrument than a broad rate adjustment for disruptions of this nature.

RBC's tracking estimate of third-quarter growth stands at 1.8% annualized, but the economists stop short of calling for additional rate cuts. Instead, they suggest that consumer data heading into Q4 tells a more resilient story, with hours worked climbing 0.6% in August and job openings holding firm through mid-September.