TD Sees Bank of Canada on Hold This Year as Inflation Expected to Stay Under Control

12:28 PM EDT, 06/18/2026 (MT Newswires) -- The Bank of Canada (BoC) is expected to remain on hold through the rest of the year, supported by an economy that continues to operate below capacity and an inflation backdrop that remains relatively contained, TD Economics said Thursday.

Expectations global energy-supply conditions will gradually return to normal trends in the next months further reinforce the outlook for subdued price pressures, TD said in a note to clients on Thursday.

Unlike the United States, underlying inflation trends in Canada remain "well behaved," according to the bank. The BoC's preferred core inflation measures have averaged around 1.5% annualized over the past six months, sitting below target and suggesting limited underlying inflation momentum.

This favorable starting point should give policymakers room to stay on the sidelines for this year, according to TD, noting that markets have already adjusted to this stance as they scaled back expectations for policy tightening in 2026 from three rate hikes as recently as late March to just one.

Although policy remains on hold, the Canadian dollar is expected to appreciate in the months ahead, supported by a convergence in policy expectations and a narrowing of Canada-U.S. rate differentials, said the bank.

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