Morningstar Says Bank of Canada Seen Keeping Rates Steady on Wednesday But Opinions Are Divided for Rest of Year

02:36 PM EST, 01/27/2026 (MT Newswires) -- The Bank of Canada is widely expected to keep interest rates on hold on Wednesday, but analysts differ on the central bank's subsequent moves, Morningstar said Tuesday.

According to Morningstar, analysts will closely watch policymakers' language ahead of upcoming continental trade talks, while the focus will be on whether the Monetary Policy Report supports or sidesteps a rate hike later this year.

The BoC is scheduled to release its policy decision and Monetary Policy Report at 9:45 a.m. ET on Wednesday and Morningstar noted some analysts cite recent macroeconomic data pointing to strength in the labor market, economic momentum, cooling inflation, and upcoming trade talks with the United States as reasons to rule out a rate cut this week. It cited Tiffany Wilding, economist at PIMCO, as saying" "We expect they will hold rates steady, and characterize the current stance of monetary policy as well-suited to the economic conditions and balance of risks."

Since the BoC held rates steady at its December meeting, the market has shifted from pricing in no policy move in 2026 to predicting a hike before the year's end, pointed out Morningstar. It cited Tiago Figueiredo, macro strategist at Desjardins Capital Markets, saying markets see less than 10% odds of a cut this month, but almost a 40% chance of a raise by year-end. "That looks premature. We think the hike risk is a 2027 story, not 2026," he adds.

The BoC enacted four rate cuts totaling 100 basis points in 2025, bringing its policy rate down to 2.25%, the bottom of its neutral range -- the theoretical rate at which monetary policy neither stimulates nor restricts the economy.

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