UBS Sees Bank of Canada on Hold This Year Amid High Uncertainty

11:58 AM EST, 01/29/2026 (MT Newswires) -- The Bank of Canada held rates at at 2.25% at Wednesday's meeting, with the statement maintaining directionality in the next move and this was emphasized by Governor Tiff Macklem too, said UBS.

Updated projections were little changed and uncertainty reigns, wrote the bank in a note to clients.

In Governor Macklem's opening statement, the word "uncertainty" featured seven times and it was mentioned 30 times in the press conference, calculated UBS.

In the bank's view, the uncertainties in the outlook are likely to persist through 2026. The Canada-US-Mexico Agreement (CUSMA) review is one reason why UBS doesn't expect any policy change from the BoC this year.

The current policy rate at the lower end of the BoC's estimates of neutral, 2.25%-3.25%, leaves policy positioned to respond to the additional uncertainties that the review may create. That said, UBS thinks that the direction of risk is potentially toward a hike rather than a cut.

Growth is likely to be "OK" this year, the labor market should continue to normalize after several years digesting the immigration influx, and inflation is still sitting above the BoC's 2% target, added the bank.

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