The Bank of Canada appears content to sit on its hands while the Canadian dollar takes a beating. Bank of America sees the central bank holding its policy rate steady through 2027, even as the US Federal Reserve keeps its own rates elevated, a divergence that would let the loonie drift lower against the greenback.
The BoC held its benchmark rate at 2.25% on June 10, marking the fifth consecutive meeting without a meaningful change.
The case for doing nothing
The BoC is caught between competing pressures that make action in either direction risky. Domestic growth remains weak, while energy-driven inflation is running hot enough that cutting rates further would be reckless.
Market participants surveyed in March 2026 don’t expect the first BoC rate increase until at least early to mid-2027. Multiple Canadian financial institutions, including National Bank and TD, have penciled in the overnight rate staying at or near 2.25% through most of the coming year, with a gradual normalization toward 2.5% to 2.75% eventually materializing in 2027.
