MNI BoC Preview-Jul 2026: Dilemma Extends For Another Meeting

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EXECUTIVE SUMMARY

• The Bank of Canada is firmly expected to announce on Wednesday that it has held the overnight rate at 2.25% for a 6th consecutive meeting. Overall, the market's slight bias toward the BOC's next move being a hike rather than a cut is likely to remain intact.
• Attention will be paid to the degree to which the BOC sees the risks to its current “dilemma” as having abated in both directions since mid-June, with oil prices lower and growth/employment appearing to be on firmer ground than it was a few months ago.
• However market pricing on net hasn’t really shifted, showing almost exactly the same as after the last meeting in June: almost one full hike (23bp) priced by year-end, but not until December. It’s still a more hawkish outlook versus pre-US/Iran war when expectations were for the next move to be a cut, if anything.
• Analysts haven’t substantially changed their outlooks for BOC policy following since May, with the overwhelming consensus being that there will be a hold through 2026 followed by 50bp in hikes in 2027, a path less aggressive than portrayed by OIS markets.