1/9/2026
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Posted in Canadian Economy and Housing Market by Vanguard Realty | Back to Main Blog Page
Canada’s central bank appears to have reached the end of its easing cycle, with Royal Bank of Canada now expecting the Bank of Canada (BoC) to keep its policy rate unchanged through 2026 before beginning to hike in 2027, a path that points to a prolonged period of stable but higher borrowing costs for mortgage clients.
RBC senior economist Claire Fan said the BoC has already delivered a “well‑telegraphed, widely‑expected hold” at 2.25%, at the bottom of its neutral range, and that “we think the BoC is done with rate cuts, and that the next change in interest rates is more likely to be a hike.”
RBC sees next move as a hike
In a separate update, Fan stressed that “the next move is more likely to be a hike although we don’t expect that until 2027,” a timeline that aligns with the bank’s base case of no additional reductions in 2026.
That view broadly matches outside forecasts. Oxford Economics senior economist Michael Davenport expects the BoC “to hold through 2026, with the next move likely a rate hike to 2.75%, but not until 2027.”
BMO chief economist Douglas Porter, meanwhile, argued there is “a greater chance of a BoC rate cut than a hike in 2026, even if the most likely outcome is no move at all,” underscoring how a full year on hold would not be unusual.
Labour backdrop supported a patient stance
Fan said recent data “continue to help with recovery from a cyclical trough,” even as “sticky underlying inflation above the BoC’s 2% target in 2026” remains part of RBC’s base case.
In her latest labour‑market commentary, Fan said December’s modest employment gain and higher jobless rate “reinforce our view that Canada’s labour market recovery is underway but will likely prove choppy, with slack absorbed only gradually over time.”
She added that “overall, this report signals gradual improvement in the Canadian labour market backdrop that aligns well with Bank of Canada expectations, and supports their near‑term holding bias.”
Employment grew by just 8,000 jobs in December after a strong fall rebound, while the unemployment rate rose to 6.8% as more people looked for work – a pattern Fan said points to a “low‑hiring but also low‑fire environment” rather than a wave of layoffs.
For brokers and lenders, the message from RBC and other forecasters have been clear: “we think the BoC is done with rate cuts,” Fan said, and markets should prepare for the “next change” in policy to be a hike, not fresh easing.
Source: Canadian Mortgage Professional
