KPMG Canada Sees Bank of Canada Rate Hike in December, Then Back to Wait-And-See

MT newswire2026/10/05 15:25

11:25 AM EDT, 10/05/2026 (MT Newswires) -- KPMG Canada now estimates a 25-basis-point Bank of Canada rate hike in December, taking the overnight rate to 2.5%, where it expects it to remain. The move reflects concerns over central bank credibility and renewed financial dominance, rather than domestic fundamentals, wrote KPMG Canada in a Friday note. Global bond markets are demanding greater policy credibility, pushing Canadian five-year yields to around 3.6%, roughly 100 bps above a year ago. Despite benign underlying inflation and spare capacity in Canada, markets remain focused on higher energy prices, US policy and fiscal sustainability, said KPMG. KPMG added it sees little justification for the four hikes priced through 2027. Instead, it expects one hike to reinforce the BoC's commitment to price stability, followed by a return to a wait-and-see stance. While the timing remains uncertain, KPMG sees Canada's central bank signaling a December hike at its Oct. 28 meeting and deliver it in December.

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