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Bank of Canada Tilts Toward Growth Support While Inflation Vigilance Remains, Nomura Says

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The Bank of Canada this week indicated that it turned somewhat growth-supportive while maintaining caution regarding inflation, Nomura Global Markets Research said in a note made available on Thursday.

Governor Tiff Macklem didn't provide a clear signal on the direction of the next policy move at Wednesday's press conference after the policy decision, said Nomura.

However, the BoC reinstated language indicating that the current policy rate remains appropriate to support the economic recovery and return inflation to the 2% target, while removing its previous discussion of conditions that could justify either rate cuts or hikes, added the bank.

As expected, Canada's central bank kept the policy rate at 2.25%.

The policy statement and revised forecasts in the new Monetary Policy Report struck a slightly more optimistic tone on growth than anticipated, according to Nomura. Although the BoC downgraded its 2026 growth outlook after a first-quarter contraction in gross domestic product, it noted that the recovery is becoming more broad-based and upgraded its projections for 2027 and 2028.

Nomura maintained its view that the BoC will remain on hold through 2026, wrote Ruchir Sharma in the note.

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