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Bank of Canada expected to keep overnight rate at 2.25%

National Bank analysts say markets are pricing late-2026 hikes too aggressively, leaving the setup for Canadian bond strength versus U.S. Treasuries if tariff risks ease.

Reported · Written up by our desk · Central Banks

FXStreet reports that National Bank of Canada analysts Taylor Schleich and Ethan Currie expect the Bank of Canada to hold its overnight rate at 2.25% and keep its current balance sheet policy unchanged.

They argue that OIS pricing still implies late-2026 hikes with odds near 65%, but risks are shifting toward a more cautious, data-dependent stance as escalating U.S. trade policy and retaliatory tariffs raise uncertainty.

The analysts also expect that if Canada-U.S. tensions ease after a decision, rate volatility could tilt toward a post-decision repricing that supports a rally in Government of Canada bonds versus U.S. Treasuries.

They add that a cut is not expected at this meeting, noting the BoC’s most recent cut came when the policy rate was higher and the central bank was already in an easing cycle, and they flag that a worsening scenario could lead to a similar pause-and-cut timeline.

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