The firm projects the Overnight Rate will remain at 2.25% through 2026 before rising to 2.75% in early 2027.
TD Securities expects the Bank of Canada to keep its Overnight Rate steady at 2.25% through 2026, citing well-anchored inflation expectations and gradual absorption of excess supply. Headline CPI remains near the upper bound of the 1-3% target range, but core inflation momentum is muted.
The bank anticipates a return to a neutral rate of 2.75% in 2027, with two 25-basis-point hikes in January and March. Oil-driven inflation shocks and geopolitical uncertainties are key factors shaping the outlook, though prices have stabilized after briefly exceeding $100 per barrel.
Markets and TD both expect the BoC to hold rates unchanged at its September 2 policy decision, with no further public events scheduled until minutes are released on September 16.