According to a Reuters poll, economists are much more in agreement than they were a month ago that the Bank of Canada will maintain its overnight interest rate through 2026.
The idea that policymakers are not in a rush to change borrowing prices following a protracted easing cycle has been strengthened by expectations of consistent economic growth and mostly managed inflation.
According to all 35 economists polled between January 20 and 23, the central bank will maintain its key rate at 2.25% on January 28.
Rates will stay unchanged through 2026, according to nearly 75% of respondents (26 out of 35), a significant increase from slightly more than 60% in December.
Despite conflicting signals from recent data, the growing majority shows confidence that the economy can continue growing without rekindling inflation concerns.
Policymakers have more incentive to be cautious than to change course since the central bank kept its benchmark rate last month and announced a prolonged pause.
Mixed economic signals support a wait-and-see stance
The Canadian economy is depicted unevenly by recent metrics. After three consecutive monthly increases, job growth stagnated in December, raising the unemployment rate.
At the same time, closely monitored core indicators eased, although inflation increased more than anticipated.
These opposing patterns highlight the central bank’s precarious balance. Softer labour market data, on the one hand, suggest that the economy is still sluggish.
However, the need for further rate decreases in the near future is limited by stronger headline inflation.
The current overnight rate is in the lower end of the 2.25%–3.25% range that the Bank of Canada deems neutral, meaning it neither promotes nor inhibits economic activity.
This stance gives decision-makers leeway when determining whether the economy is settling into a sustainable expansion.
Aggressive easing’s legacy is still present
The central bank was among the most active of its G10 counterparts, cutting interest rates by a total of 275 basis points between June 2024 and October 2025.
The economy is still feeling the consequences of those cuts, which were intended to boost growth as inflation pressures subsided.
The BoC is now prepared to adopt a somewhat protracted wait-and-see approach.
Avery Shenfeld, chief economist at CIBC Capital Markets, stated that if a change is possible this year, it’s more likely to be a cut than an increase.
“Rates are not yet that stimulative, and there is still a lot of slack in the labour market and a fair degree of uncertainty over the pace of the expansion this year,” he continued.
Trade risks increase caution in policy
Caution is also warranted due to external dangers. Economists continue to worry about the potential for new trade disputes with the United States, Canada’s biggest export market.
Another degree of uncertainty is the US-Mexico-Canada Agreement, which is set for review in July.
Despite US tariffs ranging from 25% to 50% on important industries, including steel, aluminium, automobiles, and timber, Canada’s economy has remained relatively strong.
According to Shenfeld, his base-case prediction is predicated on the assumption that industries that now have free trade access to the United States will continue to do so, either through a deal or protracted discussions that maintain the status quo.
But he cautioned that a more extensive tariff expansion might impede development and compel the central bank to lower interest rates even further.
As the policy outlook stabilises, growth slows
According to the survey, after growing by 2.6% in the third quarter, Canada’s economic growth is predicted to have drastically fallen to an annualised pace of just 0.3% last quarter.
Instead of a quick turnabout, such a slowdown strengthens the case for policy stability.
Economists see no reason for the Bank of Canada to change direction in light of the slowing growth, restrained inflation, and persistent trade uncertainties.
Rather, the consensus is that a prolonged pause will allow policymakers to assess whether the economy can pick up steam without further policy support.
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