Macquarie Economist Sees Potential Bank of Canada Rate Hike in Q4 as Inflation Moderates

11:22 AM EST, 01/20/2026 (MT Newswires) -- Canada's underlying inflation measures are likely to moderate further in the first half of this year and approach 2.0%, said David Doyle, head of economics at Macquarie Group.

Despite the recent fall in unemployment, the output gap remains sizeable, noted Doyle.

The Bank of Canada's Q4 Business Outlook Survey released on Monday showed some improvement, but was overall still subdued, the economist pointed out.

Shelter, particularly rents, is likely to show disinflation.

Beyond this, in the second half of the year, Doyle suspects underlying measures should stabilize with some risks of a pick up should growth surprise on the upside. There is the potential for unemployment to fall sharply, given the ongoing curtailment of immigration.

Macquarie continues to believe that the Canadian central bank will be on hold in the coming quarters, with the next move likely to be a hike. Should the labor market improve further, as Doyle estimates, Macquarie sees this occurring in Q4 2026.

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