SocGen Sees Bank of Canada Holding Firm Today, But Expects Refresh From It In April MPR Due To Oil Shock

09:30 AM EDT, 03/18/2026 (MT Newswires) -- The Bank of Canada is widely expected at Wednesday's policy decision due shortly to keep its policy rate unchanged at 2.25%, the low end of the neutral range, says Societe Generale.

The shock decline in employment and drop of the headline consumer price index to 1.8% year over year in February (base effects) won't compel the BoC to change its view, writes SocGen. Money markets are pricing in roughly 33bp of tightening by year-end, compared with flat before the onset of the Iran conflict, it notes.

The BoC will publish updated macro projections in its Monetary Policy Report (MPR) at the April meeting, notes SocGen, while also noting a supply shock from oil prices wasn't listed among the main risk factors for inflation in the January MPR and saying this will require a refresh next month. Inflation was previously forecast to average 2.0% in 2026 based on the lower trajectory for crude prices.

A less hawkish policy statement could invite further mean reversion in the front-end, says SocGen, noting the two-year Canada government bond yield retreated to 2.69% from 2.84% last week.

The Canadian dollar (CAD or loonie) should remain rangebound near 1.3695, according to SocGen. AUD/CAD is approaching breakout territory near 0.98 after the second rate hike by the Reserve Bank of Australia earlier this week.

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