National Bank Notes A Pick Up in Volatility in Bank of Canada Rate Expectations

11:26 AM EDT, 03/10/2026 (MT Newswires) -- Volatility in Bank of Canada rate expectations picked up in March, driven by the conflict in Iran, said National Bank of Canada.

Just two weeks ago, investors were contemplating potential BoC rate cuts this year, but quickly, OIS markets saw hikes as more likely, noted the bank.

Tightening expectations did moderate over the last 24 hours as U.S. President Donald Trump indicated the end of the war with Iran was near, the bank said.

Still, though, a tightening bias remains with about 20 basis points of hikes priced this year.

Ultimately, National Bank still expects the BoC to remain sidelined all year, even if oil prices stay elevated. The bank sees policymakers looking through a gasoline-price-related bump in headline inflation as long as the consumer price index remains in or near the 1% to 3% control band.

USMCA trade uncertainty, which seems to have been placed on the back burner, will continue to weigh on the BoC, it added. Along with uninspired growth and lingering slack in the labor market, National Bank doesn't think policymakers will be in a rush to hike.

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