“We don’t anticipate material revisions, and expect forecasts will continue to align well with our cautiously optimistic view for a gradual recovery in 2026.”
RBC also pointed to a “partial rebound” in gross domestic product after an earlier monthly contraction, with manufacturing still under pressure from global chip shortages and a steep drop in auto output, even as services such as education and retail showed tentative signs that growth was soft rather than stalling.
Those dynamics underpinned a broader house view that “the Bank of Canada is not expected to change interest rates in 2026” and that the next move is more likely to be a hike once excess slack was absorbed and core inflation stayed sticky above target.
Economists close the door on early cuts
Chances of an early‑2026 cut has also been dimmed by December’s inflation print. “There certainly is not enough here to push the BoC toward more cuts,” BMO chief economist Doug Porter said, adding that “it would take a serious deterioration in the economy and some further signs of core inflation decelerating to again open the door for renewed policy easing – we’re simply not there yet.”
An influential shadow council convened by the C.D. Howe Institute recommended that the overnight rate remain at 2.25% at this week’s announcement and “maintain it at that level until January 2027,” judging that “the current stance of monetary policy and the economy were consistent with inflation converging with the 2% target over time.”