National Bank of Canada’s (NBC) Tim Parsons and Taylor Schleich note that volatility in Bank of Canada (BoC) expectations has risen with the Iran conflict, with markets briefly pricing 2026 hikes instead of cuts. They still expect the Bank to stay on hold through 2026, looking through higher Oil-driven gasoline prices as long as Canadian CPI remains within the 1–3% control band.

BoC seen on hold despite war swings

"Volatility in Bank of Canada rate expectations picked up in March, driven by the conflict in Iran."

"Just two weeks ago, investors were contemplating potential BoC rate cuts this year but quickly OIS markets saw hikes as more likely."

"Ultimately, we still expect the Bank to remain sidelined all year, even if oil prices stay elevated."

"We see policymakers looking through a gas price related bump in headline inflation as long as CPI remains in or near the 1-3% control band."

"Along with uninspired growth and lingering slack in the labour market, we don’t think policymakers will be in a rush to hike."

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