While most of Canada’s Big 6 banks expect at least one more rate cut from the Bank of Canada this year, Scotiabank believes the central bank is already finished.

In its latest forecast, Scotia sees the BoC’s overnight rate holding at 2.75% through 2026—well above the 2.00% predicted by BMO and National Bank, and the 2.25% forecasted by RBC, CIBC and TD.

The reason? Uncertainty—lots of it.

In a recent report, Scotiabank’s economist Jean-François Perrault and his team argue that the Bank of Canada is likely to stay on hold for the foreseeable future due to escalating global risks, particularly from south of the border.

Tariff threats and inflation risks

Scotiabank’s economists point to escalating global uncertainties, particularly from U.S. trade policies, as a key factor influencing the BoC’s stance.

President Donald Trump has announced a 25% tariff on imported automobiles and parts, set to take effect on April 2, aiming to bolster domestic manufacturing. This move is expected to generate $100 billion annually but has raised concerns about increased costs and decreased sales for automakers reliant on global supply chains.

The unpredictability of U.S. trade actions is already impacting business sentiment, increasing uncertainty, and elevating inflation expectations. Scotiabank cautions that the BoC may need to consider raising rates—not cutting—if tariff-induced inflation pressures persist. Governor Tiff Macklem has previously emphasized that the Bank would not allow a tariff shock to become an inflation shock.

“Inflation expectations are already on the rise in Canada…” the report notes. “The balance of risks suggests the odds of lower rates may dominate… but there is a non-zero chance that Governor Macklem may need to raise interest rates if inflation outcomes merit it.”

Soft growth, but a cautious central bank

Scotiabank forecasts modest Canadian GDP growth of 1.7% in 2025 and 1.5% in 2026—soft but not recessionary.

It argues that recent rate cuts have already provided enough stimulus, and that uncertainty around global trade and inflation leaves little room for further easing.

While the odds of lower rates may dominate, Scotiabank warns there’s a real chance the Bank could be forced to raise interest rates if inflation outcomes merit it—even if growth continues to soften.

Other economists share a similar view

Oxford Economics also sees limited room for more easing. While it says one or two additional cuts are possible if tariff tensions ease, it doesn’t expect the policy rate to fall below 2.25%—the bottom of the BoC’s estimated neutral range.

“The BoC is likely done cutting interest rates as it tries to balance the negative hit to economic activity from the trade war against higher prices,” said Oxford economist Michael Davenport.

BMO Economics has also pointed to the Bank’s heightened sensitivity to inflation risks. In a recent note, the team emphasized that monetary policy can’t offset the price pressures caused by tariffs, and that the Bank remains focused on achieving its 2% inflation target.

Despite slower economic growth, BMO noted that the BoC may hesitate to deliver further easing unless conditions deteriorate more than expected.

BoC policy rate forecasts from the Big 6 banks

	Current Policy Rate:	Policy Rate: Q2 ’25	Policy Rate: Q3 ’25	Policy Rate: Q4 ’25	Policy Rate: Q4 ’26
	2.75%	2.25% (-25bps)	2.00% (-25bps)	2.00%	2.00%
	2.75%	2.25%	2.25%	2.25%	2.25%
	2.75%	2.50%	2.25%	2.00% (-25bps)	2.50% (-25bps)
	2.75%	2.50%	2.25%	2.25%
	2.75%	2.75%	2.75%	2.75%	2.75%
	2.75%	2.25%	2.25%	2.25%	2.25%

Written by the CMT Team