Scotiabank Sees Bank of Canada in Talk But No Action at Wednesday's Policy Meeting

11:54 AM EST, 01/26/2026 (MT Newswires) -- The Bank of Canada will fire off everything it has by way of communication tools on Wednesday, but in the end, not do anything, said Scotiabank ahead of this week's policy meeting.

Nothing by way of immediate actions, that is, but they may help to further inform key questions concerning their forward bias as it feeds into cut, hold, rate hike debates, noted the bank. Markets continue to price the next move to be up, but not until late year and Scotiabank continues to forecast 50bps of hikes late this year.

The bank's statement will be published at 9:45 a.m. ET Wednesday, along with Governor Tiff Macklem's written opening remarks to his press conference and the Monetary Policy Report (MPR) that includes full forecast updates. Macklem and Senior Deputy Governor Carolyn Rogers will hold a press conference at 10:30 a.m. ET.

No policy rate change is expected from the present 2.25% rate, stated Scotiabank. No balance sheet changes are expected, with the BoC having already pivoted last year toward expanding its assets first through repo, then through the late-year decision to purchase bills and a long way off from returning to drive gross purchases of GoC bonds.

That latter step likely won't come until well into next year and it will be in the regular conduct of monetary policy, not quantitative easing, as currency in circulation and settlement balances rise on the liability side to be invested in a cleaner balance sheet more dominated by Government off Canada (GoC) bonds like the days of old.

The numbers will do more of the talking this time, pointed out the bank. The BoC may have to raise its gross domestic product forecasts at a minimum for 2025, given tracking to date.

Key is if the BoC will leave its own inflation outlook unchanged at 2.2% year over year by Q4 2026 (2.3% using the average of trimmed mean and weighted median CPI) and then 2.1% by Q4 2027, added the bank. That alone would reinforce the impression it isn't really open to further easing and, if anything, slightly more concerned about upside risk to its 2% target.

The BoC would have to suddenly indicate they are concerned about "materially" undershooting the 2% inflation target over the medium term in order to have markets think they are open to further easing. This is improbable, concluded Scotiabank.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.