National Bank Now Sees Bank of Canada Putting Off Tightening Until at Least Early 2027

08:03 AM EST, 02/10/2026 (MT Newswires) -- Things were looking up in Canada near the end of 2025, but roughly two months later, things looked very different, said National Bank of Canada.

Hiring has come back to earth and measures of labor demand remain depressed, noted the bank. Monthly gross domestic prouct is increasingly pointing to weak Q4 growth, while housing activity has slowed.

Even inflation, which had been running warm, has cooled off "materially" in recent months, pointed out National Bank.

Geopolitical risks have also risen and an increasingly aggressive United States administration spells trouble for the mid-2026 USMCA trade agreement review.

While the bank still sees a path to 2026 Bank of Canada rate hikes, it has become much narrower and is no longer the most likely outcome. Instead, National Bank now expects the BoC to put off tightening until at least early 2027.

The odds of a 2026 hike have come down, but National Bank doesn't think the probability of a 2026 cut has gone up much. Supporting this assessment, Governor Tiff Macklem cautioned against loosening policy in the face of structural changes/lost productive capacity.

It means policymakers will need to be confident that weaker growth, if it were to materialize, is due to cyclical rather than structural forces. Making that assessment takes time, added the bank.

If the BoC were to concede that further cuts were needed, National Bank wouldn't expect that to come until late this year at the earliest.

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