According to TD Securities strategists, the Bank of Canada (BoC) is anticipated to maintain its policy rate at 2.25% during the upcoming April decision, accompanied by a cautious policy statement [1]. The April Monetary Policy Report (MPR) is expected to reflect a significant upgrade to headline inflation forecasts, primarily due to higher energy prices, while revisions to core inflation are projected to be more modest [1].
TD Securities also expects the BoC to raise its neutral rate estimate by 25 basis points, resulting in a new range of 2.50-3.50% [1]. The Bank is likely to emphasize 'two-sided' risks to economic growth stemming from elevated oil prices and reiterate its commitment to look through short-term inflation impacts [1].
The strategists note that the recent Spring Economic Update and the 2025 budget did not materially affect Canadian rates, with levels remaining unchanged and Canada continuing to underperform relative to the US [1]. TD Securities maintains its base case that the BoC will hold rates throughout 2026 and expresses a constructive outlook on fixed income markets heading into June 1st [1].
CONCLUSION
The Bank of Canada is expected to keep rates unchanged at 2.25%, with higher energy prices driving up inflation forecasts but only modest changes to core inflation. Market reaction has been muted, and analysts foresee a steady policy stance through 2026, highlighting ongoing two-sided risks to growth.