The

Bank of Canada

may have just poured cold water on rising bets for an

interest rate

hike in 2026, economists say.

Policymakers held the benchmark lending rate at 2.25 per cent, which is at the bottom of the Bank of Canada’s neutral range of 2.25 per cent to 3.25 per cent, and indicated they believe rates are at the correct level

to support the economy

as it realigns to a new global trading order brought on by United States tariffs.

Markets had previously bet the Bank of Canada would hike rates at least one time in 2026, but the odds shrank following the announcement.

In 2025, policymakers cut interest rates by 100 basis points.

Here’s what economists said about the Bank of Canada’s decision and what it means for rates.

‘Still dovish’: Capital Economics

Capital Economics Ltd.

is dropping its call for at least one interest rate cut in early 2026, which was based on the belief that the federal budget wouldn’t provide enough stimulus for the economy.

The Bank of Canada in its policy statement said it expects moderate growth in 2026 even though businesses’ hiring intentions appear muted despite the recent release of blockbuster jobs data in the latest Statistics Canada’s Labour Force Survey.

Furthermore, it said ongoing slack in the economy will keep inflation expectations tethered around the two per cent target.

“This all but kills our previously held view that the policy rate would eventually be lowered into accommodative territory at some point next year, given a sluggish recovery and lack of any offsetting short-term stimulus measures in the federal government’s latest budget,” Bradley Saunders, North America economist at Capital Economics, said in a note. “That said, we still hold a relatively dovish view.”

He said the door is still open to a move on rates, pointing out the central bank said, “Uncertainty remains elevated. If the outlook changes, we are prepared to respond.”

‘Resilient’: Servus

Canadians should expect the Bank of Canada to be on hold for an “extended period,” Charles St-Arnaud, chief economist at

Servus Credit Union Ltd.

, said.

“The overall message from today’s decision is that the global and Canadian economies have been resilient in the face of the U.S. tariffs,” he said in a note.

Despite that, policymakers stuck with previous assessments of the economy, including that the job market might not be as strong as recent Labour Force Surveys suggest, citing weakness in trade-sensitive sectors.

The Bank of Canada also said the fourth quarter could be “weak” and while growth is expected to pick up in 2026, it could be buffeted by “large swings in trade” that produce volatility.

Still, policymakers repeated their message from October that interest rates are sitting at the right level.

“The general tone of the communique suggests that the threshold for a cut is relatively high and would require a significant deterioration of the outlook,” St-Arnaud said.

On hold: Oxford

“Stronger-than-expected (third-quarter gross domestic product) and recent labour market data likely solidified the (Bank of Canada’s) decision to stand pat after back-to-back 25-basis-point rate cuts,” Michael Davenport, senior economist at

Oxford Economics Ltd.

, said in a note.

Third-quarter economic growth was 2.6 per cent annualized, trouncing estimates of 0.5 per cent, though the strong showing was more attributed to a drop in imports rather than economic vibrancy.

The Bank of Canada is looking at an economic balancing act in 2026, Davenport said, and has to weigh the risks of the trade war boosting inflation against inflation falling due to weakening domestic demand.

“Like most aspects of the outlook for 2026, the path ahead for the Bank of Canada will likely hinge on U.S.-Canada trade policy and the upcoming renegotiation of the Canada-U.S.-Mexico Agreement (CUSMA),” he said.

For now, Davenport said he thinks the Bank of Canada will hold rates in 2026, with the next move likely a rate hike to 2.75 per cent, but not until 2027.

‘Holding steady’: National Bank of Canada

“As expected, the Bank of Canada held its policy rate unchanged, but stopped short of validating market expectations for rate hikes as soon as the middle of next year,” Taylor Schleich and Ethan Currie, economists at

National Bank of Canada

, said in a note.

Policymakers had to consider strong third-quarter economic growth versus ongoing slack as well as strong job numbers versus weak hiring plans, leading governor Tiff Macklem to stick with his guidance on rates.

“Going forward, we see the Bank (of Canada) holding steady through at least the first half of the year,” the pair said.

However, they advanced their call for a rate hike to the final quarter of 2026 from the first quarter of 2027 if the unemployment rate continues to fall but inflation starts to heat up.

If CUSMA talks turn “messy,” rate hikes could be pushed into 2027.

“The (Bank of Canada) still thinks the policy rate is at ‘about the right level’ to achieve their mandate and they stand ready to respond to more material changes to the outlook,” the economists said.

  • Bank of Canada holds interest rates: Read the official statement
  • Bank of Canada holds interest rate at 2.25%, citing resilient economy

• Email: gmvsuhanic@postmedia.com