UBS Sees Bank of Canada on Hold This Year as Inflation Slows in January

12:18 PM EST, 02/18/2026 (MT Newswires) -- Canadian headline inflation was flat over the month in January, non-seasonally adjusted, a little softer than consensus expectations for a 0.1% month over month rise, said UBS.

The annual rate of inflation moved down to 2.3% from 2.4% in December. Core inflation declined 0.2% over the month, non-seasonally adjusted, leaving the annual rate of core inflation up 2.4% in the 12 months to January, versus 2.5% in the 12 months to December.

Tuesday's softer than expected labor market data in January and slowing in inflation present in January's consumer price index report, if maintained, would point to a potential easing bias from the Bank of Canada, stated UBS.

In his recent remarks, Governor Tiff Macklem noted offsetting dynamics driving Canadian inflation with tariffs and the cost of reconfiguring trade adding to price pressures, while weakness in demand constrains the extent of price increases.

The bank expects the BoC will remain in a wait-and-see mode given the heightened uncertainty in the outlook. This was also clear in the recently published summary of deliberations from the January policy meeting.

UBS thinks Canada's central bank will remain on hold this year.

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