According to TD Securities economists Robert Both and Emma Lawrence, the Bank of Canada (BoC) is anticipated to keep its overnight rate steady at 2.25% during the upcoming June meeting, despite recent softer Canadian economic data and inflation risks that remain elevated [1]. The economists project that inflation will peak near 3% in the second quarter, which is higher than the BoC's own projections from the April Monetary Policy Report [1].
TD Securities notes that while the BoC is expected to maintain its current policy stance, the central bank is unlikely to dismiss the risks of broadening inflation pressures or the possibility of consecutive rate hikes in its forward guidance [1]. The economists emphasize that well-anchored inflation expectations, lower breadth of inflation, and muted core inflation momentum provide the BoC with justification to look through the near-term impacts of higher oil prices [1].
Looking ahead, TD Securities forecasts that the BoC will keep the overnight rate at 2.25% through 2026, before returning to a neutral rate of 2.75% next year, with potential 25 basis point hikes in January and March [1]. The upcoming BoC decision is highlighted as a primary risk event for Canada, with market participants closely watching for any changes in the central bank's messaging [1].
CONCLUSION
The Bank of Canada is widely expected to hold its policy rate at 2.25% in June, as it balances ongoing inflation risks with a softer domestic economic backdrop. While inflation is projected to peak above the BoC's earlier estimates, well-anchored expectations and muted core pressures support a steady policy stance. Market attention remains focused on the BoC's guidance for any signals of future rate adjustments.