TD Sees Bank of Canada on Hold as Inflation Expected Softer on Monday

08:30 AM EST, 01/19/2026 (MT Newswires) -- The Bank of Canada's Business Outlook Survey (BOS) and the country's consumer price index inflation data are both out on Monday, said TD.

Consensus expectations are for inflation to soften on a month-on-month basis, while remaining steady year-on-year, noted the bank.

This report is unlikely to move the needle for the BoC and TD expects it to remain on hold for the time being.

The first visit by a Canadian prime minister to China since 2017 resulted in a series of agreements on energy, agri-food, and trade, pointed out the bank after last week's visit. On energy, the countries expressed their intention to strengthen collaboration in energy, clean technology and climate competitiveness, with Canada keen on attracting Chinese investment on renewable energy projects.

Canada also agreed to admit up to 49,000 Chinese electric vehicles (EVs) into the domestic market at a tariff rate of 6.1%, sharply lower than the 100% tariff imposed in 2024. The quota represents roughly 3% of new vehicle sales in Canada, but 30% of EV sales. In return, China will reduce tariffs on Canadian canola seed from roughly 84% to about 15%, while those on canola oil will be eliminated through the end of the year, implying a roughly 12% duty on canola exports overall.

Over the past year, Canada's canola seed exports fell by US$2.3 billion, only partially offset by an increase of exports to other countries. With tariff relief on canola and other products, the Canadian government expects the deal to unlock nearly $3 billion in exports, added TD.

Prime Minister Mark Carney described the outcome as a "preliminary but landmark" agreement, representing a meaningful step toward rebuilding Canada-China economic relations. Further collaboration remains possible, particularly through the Joint Economic and Trade Commission, which is set to meet later this year and will be chaired by trade ministers from both countries.

However, the scope for deeper progress may ultimately depend on progress and developments in trade negotiations with the United States, according to the bank.

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