Bank of Canada rate hike expectations have continued to moderate over recent weeks and are now reflecting a much more reasonable path for the policy rate, said National Bank of Canada.
The BoC's first hike is now nearly fully priced for December 2026, noted the bank.
That still may be a bit early as National Bank sees the first rate hike being delivered in early 2027, but it could materialize if the economy can pick up in line with what businesses were expecting just a couple of months ago.
Despite the rise in headline inflation on the back of the oil price surge, Monday's consumer price index report reinforced that core inflation pressures are relatively muted, according to the bank.
As a consequence, in next week's rate decision, National Bank expects the BoC to reiterate that it will be looking through this initial all-items inflation jump.