Bank of Canada Poised to Hold Rates Amid Tariffs, War, and Recession

The Bank of Canada is widely expected to hold its benchmark rate at 2.25% this week, as the economy faces a technical recession and high inflation fueled by U.S. tariffs and the Iran conflict.

Most economists agree: the next move is more likely a hike than a cut. RBC Economics predicts rates will stay on hold through 2026, rising in 2027. The Parliamentary Budget Officer sees the rate reaching 2.5% by mid-2027 and 2.75% by year-end.

Scotiabank's Derek Holt is even more hawkish, forecasting 0.5% in hikes in late 2026 and a terminal rate of 3% in early 2027.

While GDP data confirms a technical recession, senior deputy governor Carolyn Rogers cautions against overreacting. Core inflation is at 2%, within the bank's target range, and May's jobs report showed 88,000 new jobs and a drop in unemployment to 6.6%.

The decision will be announced Wednesday at 9:45 a.m. ET.