CAD: BoC risks and upside potential – Commerzbank

FXStreet Insights Team FXStreet

Commerzbank’s Michael Pfister expects the Bank of Canada to leave rates unchanged, in line with Bloomberg consensus. He argues the Bank of Canada is one of the few G10 central banks that could still hike in 2026, given slightly expansionary real rates and hopes for stronger growth in the second half. Emphasis on upside inflation risks could support the Canadian Dollar.

BoC on hold but hike risk

"The Bank of Canada will kick things off this afternoon, European time, with all economists surveyed by Bloomberg expecting an unchanged interest rate."

"However, as we discussed on these pages on Monday, the Bank of Canada is likely one of the few G10 central banks that could really hike rates this year."

"The real interest rate is likely in slightly expansionary territory, while at the same time, there are legitimate hopes that the real economy will pick up in the second half of the year."

"If the monetary policymakers emphasize the significance of upside inflation risks today, discussions could gain momentum again - and the CAD could benefit."

"But Monday's inflation figures also made it clear that a rate hike is not a foregone conclusion; the headline rate even fell by 0.1 percentage points more than expected."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

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FXStreet Insights Team

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