Bank tempers hike expectations amid stronger labour market

The Bank of Canada kept its key policy rate at the bottom of its 2.25% to 3.25% neutral range estimate today, as expected. While there was recognition from policymakers that the labour market had performed better recently, this was not enough to change the Bank’s modest expectations for the economy’s growth trajectory over the next year. This supports our view that, given little near-term fiscal support from the federal government’s latest budget and continued trade uncertainty as CUSMA undergoes renegotiation, investors have gotten ahead of themselves in pricing in rate hikes in the second half of 2026.