- Business sentiment subdued, inflation steady - MPR to reflect fiscal stimulus and GDP revisions - Markets see rates on hold through 2026 - Decision due at 14:45 GMT/09:45 ET - Press conference scheduled for 15:30 GMT/10:30 GMT
Both North American central banks will announce policy decisions on Wednesday. The continent’s leaders may have butted heads in Davos, Switzerland at the World Economic Forum, last week, but policymakers appear aligned on the need to keep monetary policy on hold this month.
According to the latest economists’ poll, the Bank of Canada is widely expected to leave its overnight rate unchanged at 2.25%, where it has sat since September last year.
The interest rate decision will be accompanied by an updated Monetary Policy Report (MPR).
Analysts at BofA Global Research said the January decision is conditioned on strong third-quarter GDP growth, the substantial fiscal stimulus outlined in Budget 2025, and a labour market that delivered robust prints in the closing months of 2025.
At its December meeting, the Governing Council stated that if inflation and economic activity evolved broadly in line with its projections, policymakers would deem the current policy rate to be “about the right level.”
The latest quarterly Business Outlook Survey showed sentiment among firms remained subdued, albeit above the historic lows seen in Q2 2025. Companies cited the economic effects of the trade war as a key drag on sales growth. In response, an increasing number of businesses reported shifting sales toward non-US markets.
The survey also pointed to a modest improvement in investment intentions, while inflation expectations were little changed, remaining in a 2.5%–3.0% range.
Updated projections
The first MPR of the year is set to be published this month. Staff projections released on 29 October looked for economic growth to strengthen from around 0.75% in the second half of 2025, with annual growth averaging 1.4% in both 2026 and 2027. Inflation was expected to remain close to 2% throughout the projection horizon.
Central bank watchers expect only marginal changes to the near-term outlook.
TD Securities said the new MPR forecasts will incorporate both the 2025 federal budget and historical GDP revisions. The latter implies a smaller output gap than in the October MPR, alongside softer Q4 GDP tracking and a recent deceleration in core inflation measures.
Rate path expectations
In terms of the policy outlook for 2026, market pricing sets a relatively high bar for further easing.
“We believe the Bank of Canada has reached its terminal rate for this cycle at 2.25%, but expect the bank to remain cautious as it continues to assess the timeline for a return to neutral,” TD Securities said in a research note. “The overnight rate is currently sitting at the lower end of the bank’s neutral range (2.25%–3.25%), and we expect the bank to maintain its current stance through 2026 before moving back towards neutral in early 2027.”
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- Business sentiment subdued, inflation steady
- MPR to reflect fiscal stimulus and GDP revisions
- Markets see rates on hold through 2026
- Decision due at 14:45 GMT/09:45 ET
- Press conference scheduled for 15:30 GMT/10:30 GMT
By Harry Daniels
LiveSquawk News
@HarryDaniels71
27 January 2026 | 18:30 GMT
Both North American central banks will announce policy decisions on Wednesday. The continent’s leaders may have butted heads in Davos, Switzerland at the World Economic Forum, last week, but policymakers appear aligned on the need to keep monetary policy on hold this month.
According to the latest economists’ poll, the Bank of Canada is widely expected to leave its overnight rate unchanged at 2.25%, where it has sat since September last year.
The interest rate decision will be accompanied by an updated Monetary Policy Report (MPR).
Analysts at BofA Global Research said the January decision is conditioned on strong third-quarter GDP growth, the substantial fiscal stimulus outlined in Budget 2025, and a labour market that delivered robust prints in the closing months of 2025.
At its December meeting, the Governing Council stated that if inflation and economic activity evolved broadly in line with its projections, policymakers would deem the current policy rate to be “about the right level.”
The latest quarterly Business Outlook Survey showed sentiment among firms remained subdued, albeit above the historic lows seen in Q2 2025. Companies cited the economic effects of the trade war as a key drag on sales growth. In response, an increasing number of businesses reported shifting sales toward non-US markets.
The survey also pointed to a modest improvement in investment intentions, while inflation expectations were little changed, remaining in a 2.5%–3.0% range.
The first MPR of the year is set to be published this month. Staff projections released on 29 October looked for economic growth to strengthen from around 0.75% in the second half of 2025, with annual growth averaging 1.4% in both 2026 and 2027. Inflation was expected to remain close to 2% throughout the projection horizon.
Central bank watchers expect only marginal changes to the near-term outlook.
TD Securities said the new MPR forecasts will incorporate both the 2025 federal budget and historical GDP revisions. The latter implies a smaller output gap than in the October MPR, alongside softer Q4 GDP tracking and a recent deceleration in core inflation measures.
In terms of the policy outlook for 2026, market pricing sets a relatively high bar for further easing.
“We believe the Bank of Canada has reached its terminal rate for this cycle at 2.25%, but expect the bank to remain cautious as it continues to assess the timeline for a return to neutral,” TD Securities said in a research note. “The overnight rate is currently sitting at the lower end of the bank’s neutral range (2.25%–3.25%), and we expect the bank to maintain its current stance through 2026 before moving back towards neutral in early 2027.”