BENGALURU, July 10 - The Bank of Canada will hold its overnight rate at 2.25% on July 15 and keep it there well into next year as price pressures remain largely contained and the economy gradually recovers, a Reuters poll showed.
While inflation rose to 3.2% in May, breaching the central bank's 1%-3% target range for the first time since December 2023, price increases are expected to slow over coming months, suggesting inflation is less of a worry in Canada compared to other major economies.
The BoC last cut its policy rate in October 2025 to support growth hit by higher U.S. tariffs. The economy has recovered from a technical recession as higher oil prices lifted export revenues and the labour market is showing signs of recovery, suggesting less urgency for a policy move.
All 36 economists in a July 7-10 poll expected the BoC to hold the overnight rate at 2.25% next week, with a majority — 19 of 30 — predicting borrowing costs to stay unchanged until at least July 2027.
“There's no urgency to cut interest rates given signs that growth has resumed in the spring, and no need to seriously talk about hiking rates given the degree of economic slack and the stability in core inflation measures,” said Avery Shenfeld, chief economist at CIBC Capital Markets.
Poll medians showed the next move — a hike — would not be until the second half of next year.
“For a hike, there will have to be more of energy price increases passing through in the economy or a de-anchoring of inflation expectations. An evolution of trade policy to the downside, broader economic contraction or higher unemployment rates could trigger a cut,” said Adam Schickling, a senior economist at Vanguard.
Inflation was forecast to average 2.6% in 2026. Core inflation will be at 2.1%, poll medians showed, putting Canada in a better position to absorb shocks compared to its peers.
Meanwhile Canada's economic recovery was expected to continue and growth to average 1.8% in 2027, up from 0.7% this year.
That optimism was despite the Trump administration last week declining to extend the U.S.-Mexico-Canada Agreement (USMCA).
The USMCA, known as CUSMA in Canada, negotiated by President Donald Trump's first administration, is in place for another 10 years with annual reviews before it expires — unless the three countries agree to renew it with changes.
All but one of 17 economists who answered an additional question said the likelihood of the U.S. withdrawing from the USMCA was low.
“From an economic rationale perspective, there's a strong argument to keep USMCA from the perspective of all parties involved. The deal is beneficial across the Canada-U.S. border and the U.S.-Mexico border,” said Nathan Janzen, assistant chief economist at the Royal Bank of Canada.
The unemployment rate will average around the current level of 6.6% in 2026.
(Other stories from the Reuters global economic poll)
Reporting by Nushaiba Iqbal; Additional reporting by Rhea Rose Abraham; Polling by Debrah Gomes; Editing by Nia Williams
