National Bank Previews This Week's Bank of Canada Policy Decision

10:04 AM EST, 01/26/2026 (MT Newswires) -- The Bank of Canada is set to leave its overnight target unchanged at 2.25% on Wednesday, a decision widely expected by forecasters and OIS markets, said National Bank of Canada.

This would mark the second consecutive hold after policymakers declared in October that policy is at "about the right level" to keep inflation near target and support the economy's transition.

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

A steady dose of impressive economic data dashed rate cut hopes in early December and led traders to price in 2026 rate hikes, stated the bank. Economic and inflation data have since moderated, which has produced a slight near-term easing bias and a mild hiking bias later in 2026.

National Bank doesn't expect the Governing Council to clearly endorse the hawks or the doves. Instead, the BoC will reiterate that policy is appropriately calibrated in what should be a balanced, one-hand-on-the-other-hand statement.

The statement is likely to balance December's jobless rate increase and still-subdued hiring intentions against an acknowledgment of broader labor market improvements over recent months, it pointed out.

Recent inflation data has been encouraging as core momentum has cooled off. Still, the BoC's broad suite of inflation indicators points to annual inflation a bit above target. As a consequence, the BoC is likely to reiterate its assessment that underlying inflation is "around 2.5%," added the bank

In an updated Monetary Policy Report due out Wednesday, National Bank expects growth projections to be boosted due to a strong Q3 and revisions to earlier quarters. Compared with October, 2025, gross domestic product growth will look much stronger, but 2026 may be upwardly revised too.

The bank predicts the BoC's output gap estimate to narrow -- to -1% to 0% of GDP -- but there's a risk it's left unchanged. Projections for inflation will undergo smaller revisions but should rise "modestly."

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