UBS Sees Bank of Canada More Likely to Cut Rates Rather Than Hike

10:59 AM EDT, 03/19/2026 (MT Newswires) -- The Bank of Canada held rates at Wednesday's policy meeting and kept optionality in both the timing and direction of future moves in the policy rate, said UBS.

Governor Tiff Macklem noted that the oil price shock brings downside risks to growth and upside risks to inflation, with the persistence in the move key to the economic impact and as such the appropriate policy response.

At 2.25%, the policy rate is currently sitting on the lower end of the BoC's estimated range for neutral, wrote the bank in a note to clients.

Communications on Wednesday were in line with the view of UBS that the BoC will remain on hold this year. However, given the weaker starting point for the economy, risks potentially tilt toward cuts rather than hikes at this juncture, according to UBS, with a new layer of uncertainty for an economy already weathering trade policy uncertainty.

Overall, the signal continues to be a "nimble" policy response in the face of multiple uncertain economic shocks, added the bank.

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