Key findings
- All 41 economists surveyed between April 21 and 24 anticipate the BoC will keep the overnight rate at 2.25% on April 29.
- More than 80% of respondents - 33 out of 41 - expect no further rate increases through the rest of the year.
- Markets, however, continue to assign some probability to a fourth-quarter rate rise; economists say that would be conditional on energy-driven inflation proving persistent.
Full story
A clear majority of economists polled in late April expect the Bank of Canada to maintain its policy rate at the current 2.25% at next week’s meeting and to hold steady for the remainder of the year. That view has remained largely unchanged since before the recent U.S.-Israeli conflict involving Iran, according to the survey respondents.
Although financial markets still place odds on a potential increase in the central bank’s overnight rate in the fourth quarter, most economists in the poll say such a move would only be justified if the recent jump in energy prices translates into broader, sustained inflationary pressure. They point to a combination of weak economic growth and a softening labour market as factors that argue against an imminent tightening of monetary policy.
Data for March showed headline inflation at 2.4%, which sits within the Bank of Canada’s 1% to 3% target band. Governor Tiff Macklem was quoted last week saying that a rise in short-term inflation expectations should not unduly concern the central bank. While higher fuel costs have strained household budgets in Canada as in other countries, the poll notes that the country’s status as a net exporter of energy offers some cushion for the overall economy.
Inflation projections in the poll’s median responses were revised upward relative to January. Inflation is now forecast to average 2.9%, 2.7% and 2.5% across the current and ensuing quarters - roughly 50 basis points higher than the earlier median projections. Those upward revisions have prompted a noteworthy minority of economists to see the possibility of at least one rate increase by the end of March of next year: 14 of 34 respondents registering that view.
Commenting on the policy stance, Claire Fan, a senior economist at RBC, said that softening core inflation affords the BoC greater leeway to be patient. "They can wait for actual concrete signs of risk of inflation climbing higher, broadening and persisting...as opposed to rushing to make a decision," she said.
Trade and growth considerations
Beyond energy and inflation, trade dynamics are flagged as a central concern for Canada’s outlook. The country’s free trade agreement with the United States and Mexico, known as USMCA, is slated for renegotiation this summer. Janice Charette, Canada’s chief trade negotiator to the U.S., indicated she does not expect all outstanding issues to be resolved before the July 1 deadline, but said that incompletion would not necessarily mean the collapse of the agreement.
Douglas Porter, chief economist at BMO Capital Markets, warned that once energy price volatility cools, attention will shift back to the direction of USMCA. "Frankly, I’m a bit concerned on that front. I am concerned trade is going to continue to be a drag on the Canadian economy," he said.
Median growth projections in the poll show Canadian GDP expanding 1.7% in 2025, before slowing to 1.2% in 2026. That combination of easing growth alongside rising inflation creates a challenging mix, though Porter said it does not meet the usual definition of stagflation, which is typically described as a prolonged period marked by little or no growth, high inflation and rising unemployment.
The unemployment rate forecast for 2026 was slightly revised to 6.6% in the April poll, down from 6.7% in January’s survey. RBC’s Fan said she expected the improvement in the labour market to be uneven, pointing to job losses concentrated in sectors that are exposed to or dependent on U.S. demand. She added that anticipated gains in domestic demand later in the year should help offset some of the weakness coming from trade-exposed industries.
Conclusion
The Reuters poll underscores a broad consensus among economists that the Bank of Canada will prioritize patience in the near term, balancing the inflationary impact of higher energy costs against a modest growth outlook and a labour market that is softening. While market pricing allows for a possible end-of-year rate increase, economists stress that any policy tightening would need evidence that energy-driven inflation has become persistent and broad-based.