Bank of Canada: Gradual tightening path into 2027 – NBC
National Bank of Canada's (NBC) Taylor Schleich and Ethan Currie reaffirm their Bank of Canada (BoC) rate call, arguing that despite stronger Canadian labour data and robust Q2 GDP, accumulated slack and data lags should delay tightening.
The Bank of Canada (BoC) has maintained its forecast for a gradual tightening path into 2027, according to Taylor Schleich and Ethan Currie of the National Bank of Canada (NBC). Despite stronger Canadian labour data and robust Q2 GDP growth, the analysts argue that accumulated slack and data lags should delay any rate hikes. They predict that the first BoC rate increase will occur in Q1:2027, which is later than the market's expectations but earlier than the median forecast from Bloomberg.
The analysts also believe that short-term Government of Canada bonds will likely underperform U.S. Treasuries during this period. With inflation currently near 3% and set to remain above the target level, the BoC may raise rates this year. However, given the time lags in data publication, it is unlikely that conditions for a rate increase will be met in 2026.
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