TD Securities reports the Bank of Canada (BoC) left rates at 2.25% with a cautious tone, highlighting trade uncertainty and a soft labour market while modestly upgrading 2026 growth. The team expects no policy changes through 2026 and two hikes in 2027. They see front-end Canadian rates as too cheap and forecast USD/CAD trading choppily around current levels in Q2.

BoC on hold with conditional guidance

"The Bank of Canada held rates unchanged at 2.25% in April."

"The communique had a cautious tone, with the Bank downplaying positive growth impacts from higher energy prices and paying special attention to trade uncertainty and a soft labour market."

"Despite the Bank's apparent caution, growth forecasts for 2026 were nonetheless revised modestly higher, and in that sense to communique looks like it was implicitly designed to push back against hawkish expectations."

"We look for the Bank of Canada to stay on hold for all of 2026, with two hikes in 2027."

"We expect the USD/CAD to be choppy and trade around current levels through Q2."

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