MNI BoC Preview-Sep 2026: Holding Fire As Trade Risks Return

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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 7th consecutive meeting.
• However, the re-escalation of trade tensions between Canada and the US has complicated the outlook since the previous meeting, introducing both downside risks to growth and upside risks to inflation.
• With recent data suggesting that economic growth and the labour market are on relatively solid ground, there is little immediate impetus to cut rates from the current level that is considered by the BOC to be at the low end of the neutral range.
• However, continued softness in core inflation suggests little urgency to tighten either, even with the potential for retaliatory tariffs on US imports to boost price pressures.
• Attention will therefore be on how Governing Council and Gov Macklem characterize their concerns over the impact of the trade developments, and openness to either hikes or cuts ahead.
• Either way it’s unlikely the BOC will signal eagerness to make a move. Rate markets continue to expect the next BOC rate move to be a hike and not a cut, but only limited tightening is seen through early 2027.