According to Royal Bank of Canada (RBC) economist Claire Fan, the Bank of Canada (BoC) is expected to maintain its current interest rate policy through 2026, citing findings from the Q2 2026 Bank of Canada Business Outlook Survey [1]. The survey, conducted in May during a period of elevated oil prices due to conflict in the Middle East, indicated that Canadian businesses anticipate resilient sales and investment, despite earlier oil price shocks [1].
Fan notes that Canadian economic growth picked up in the second quarter following stagnation in the fourth and first quarters, while core inflation pressures remained subdued as of May [1]. This combination of improving growth and contained inflation reduces the likelihood of the BoC adjusting its policy stance in either direction, according to RBC [1].
The Business Outlook Survey also revealed that, although businesses expect rising prices in the near term, their longer-term (five-year) inflation expectations remain stable [1]. In contrast, the separate Canadian Survey on Consumer Expectations (CSCE) found that higher energy prices are having a more significant impact on household spending plans in the second quarter [1].
RBC's analysis concludes that, given these conditions, the central bank is likely to keep interest rates unchanged through 2026 [1].
CONCLUSION
RBC anticipates that the Bank of Canada will maintain its current interest rate policy through 2026, supported by resilient business outlooks and subdued core inflation. While businesses remain optimistic, higher energy prices are weighing more heavily on consumer spending. The overall market takeaway is a stable policy outlook with moderate implications for Canadian financial markets.