Bank of Canada Expected to Hold Interest Rate at 2.25%, Rate Hikes Possible in 2027

The Bank of Canada is expected to keep its benchmark interest rate unchanged at 2.25% at its upcoming meeting on Wednesday, marking a seventh consecutive rate hold. The central bank has maintained the rate at 2.25% since October 2025.

Financial markets and economists expect the Bank of Canada to continue with a cautious, wait-and-see approach for now as it closely monitors inflation, economic growth and uncertainty surrounding the Canada-U.S. trade relationship.

However, discussions are growing about the possibility of interest rate increases next year as the ongoing trade war could put additional pressure on inflation. Some economists believe the central bank may have to raise its benchmark rate to around 2.75% in 2027 if tariff-related inflation becomes more persistent.

Economists at RBC have said that the current U.S. tariffs and Canada's retaliatory measures do not pose a major risk to the Canadian economy at this stage. However, they warn that a significant escalation in the trade war could create more serious economic challenges.

A recent Reuters poll found that all 35 economists surveyed expected the Bank of Canada to hold its policy rate at 2.25% on September 2. Nearly half expect a rate increase by mid-2027, while the median forecast puts the rate at 2.50% by the end of 2027.

The Bank of Canada's September 2 interest rate announcement is therefore expected to provide important clues about the future direction of borrowing costs and whether policymakers are preparing for potential rate increases next year.