National Bank Sees Canada's Central Bank on Hold Wednesday

12:26 PM EST, 12/09/2025 (MT Newswires) -- The Bank of Canada is set to leave its policy rate unchanged at 2.25% this week, after declaring in October that it is "at about the right level" to keep inflation near target and help the economy through a structural adjustment, said National Bank of Canada.

Forecasters unanimously expect a hold and OIS markets see no chance of a cut, wrote the bank in a note published on Monday.

The BoC is scheduled to release its policy statement at 9:45 a.m. ET on Wednesday.

After October's rate cut, many were skeptical that the BoC easing cycle was over. But implied cut odds were gradually, and then abruptly, pared after stronger-than-expected jobs, inflation and gross domestic product data, stated National Bank.

The BoC statement will highlight surprisingly strong job growth but may also emphasize muted hiring intentions, according to the bank. Similarly, the BoC is likely to counterbalance unexpectedly strong GDP growth by flagging weak domestic demand.

There won't be a new Monetary Policy Report to pore over, but National Bank doesn't think the BoC's economic outlook has changed "dramatically".

The bank will be carefully watching the BoC's assessment of "underlying inflation". Price pressures continue to run above target and the BoC's broad suite of core measures has inched up lately.

There's a risk, but it isn't National Bank's base case, the BoC will now judge that underlying is running near 3% from 2.5% currently, which would be a hawkish signal.

As for guidance, the bank sees the policy statement reiterating that the policy rate is at "about the right level." The BoC will retain optionality by repeating that it's "prepared to respond" if the outlook changes.

National Bank doesn't see policymakers validating evolving market expectations for hikes as early as the spring, given that some data is giving conflicting signals.

Still, the bank believes tightening should be brought forward and it now foresees the first rate hike being delivered in Q4 2026.

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