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Morgan Stanley Sees Bank of Canada on Hold Through 2027

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Given weak Canadian growth, soft labor-market dynamics and a benign core inflation backdrop, Morgan Stanley doesn't see the Bank of Canada rushing to normalize policy further.

The bank expects the BoC to be on hold over the course of this year and 2027, maintaining the view that policy is "in the right place."

According to Morgan Stanley, risks are two-sided: persistently higher oil prices could eventually force hikes, particularly if inflation stays above target for several quarters, while a sharper oil-led global slowdown could prompt renewed easing.

In the bank's baseline, growth rises "modestly" above potential only in 2027, so tightening risks are likely deferred until then.

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