The Bank of Canada (BoC) is expected to keep its Overnight Rate at 2.25% through the April meeting and likely for the remainder of 2026, according to TD Securities strategists. The BoC is anticipated to adopt a balanced yet cautious tone, highlighting two-sided growth risks stemming from higher oil prices and the ongoing USMCA renegotiation, while choosing to look through near-term inflation spikes. The April Monetary Policy Report (MPR) is projected to show a sharp upgrade to the BoC's inflation forecast due to higher energy prices, with more modest revisions to core inflation and GDP. Despite signs of growth picking up, the BoC is expected to acknowledge that material slack remains in the economy and to pay particular attention to risks associated with the closure of the Hormuz Strait and USMCA negotiations. TD Securities notes that recent upside surprises in rates are more reflective of imported pricing from anticipated US Federal Reserve actions rather than a shift in the BoC's outlook, with December currently priced at 2.61% [1].
Meanwhile, the Bank of England's (BoE) Monetary Policy Committee (MPC) is also expected to leave the Bank Rate unchanged at 3.75% at its April meeting, maintaining a vigilant stance as outlined in March, according to Rabobank’s Senior Macro Strategist Stefan Koopman. The BoE's decision is influenced by weaker domestic demand, already restrictive policy, and lower-than-expected energy prices, which may prompt a slight downward revision to near-term inflation forecasts. Despite the Strait of Hormuz remaining closed, energy prices have not risen as much as anticipated, reducing the risk of entrenched inflation. However, the outlook remains uncertain. Koopman expects one additional rate hike to demonstrate vigilance but does not foresee a full renewed hiking cycle, citing that the domestic backdrop is considerably weaker than in 2022 and that the bar for further tightening remains high [2].
Both central banks are responding to evolving global and domestic conditions with a cautious approach, emphasizing vigilance and a readiness to adjust policy as risks develop. The BoC is particularly focused on external risks such as oil prices and trade negotiations, while the BoE is more concerned with domestic demand and the inflationary impact of energy prices.
CONCLUSION
Both the Bank of Canada and Bank of England are expected to maintain their current policy rates at their upcoming April meetings, reflecting a cautious and vigilant approach amid mixed signals on inflation and growth. While the BoC is likely to remain on hold for an extended period, the BoE may consider one more rate hike but is unlikely to embark on a new tightening cycle. Market participants should expect continued central bank caution as global and domestic uncertainties persist.