Market Participants Expect One More Bank of Canada Rate Hike

By Paul Vieira

OTTAWA--The Bank of Canada's latest quarterly survey of market participants indicates that traders expect a prolonged pause once policymakers deliver a second quarter-point rate hike.

The survey of 25 financial-market participants, published Monday, was conducted in late September, and at the time they didn't expect a rate hike in October but a quarter-point climb in December. On Oct. 28, the Bank of Canada raised its policy rate to 2.5%, and said interest rates could head higher due to its sharply-higher inflation forecast.

The median of results suggest market participants expect the target for the overnight rate to reach 2.75% by March, and then stay at that level through 2028. Most participants suggested they expect annual growth of between 1% and 2% for this year and next.

Furthermore, the median of results indicated that market participants expect headline inflation in Canada to return to 2% by the end of 2027. That's in contrast to the central bank's own forecast, which expects inflation above 3% to be the norm until the third quarter of next year, and reaching its 2% target by mid-2028.

Some economists have argued in recent days that the Bank of Canada's tightening cycle might prove limited amid weaker-than-anticipated growth and labor-market data.

Douglas Porter, chief economist at BMO Capital Markets, said the pullback in crude-oil prices and technology stocks, alongside three straight months of job losses in Canada, could persuade the central bank to pause at its December meeting.

Write to Paul Vieira

(END) Dow Jones Newswires

November 09, 2026 11:20 ET (16:20 GMT)