UBS Expects Bank of Canada Rate Hike in 2027 as Growth Strengthens

09:13 AM EDT, 08/31/2026 (MT Newswires) -- UBS Global Research said it expects the Bank of Canada to remain on hold through this year, with policy easing in 2027 as economic growth broadens. UBS, in a note dated Sunday, said it sees the BoC's policy rate at 2.75% at the end of next year from today's 2.25%. Canada's economy grew 3.3% annualized in the second quarter in data released on Friday, slightly above expectations, with growth supported by stronger consumption, a rebound in business investment and improved net exports. UBS now expects real gross domestic product growth of 1.1% this year and 1.9% in 2027, marking a modest upgrade to the outlook. Still, persistent US trade tensions and the risk of tariff- and currency-related inflation should keep the BoC on hold this year. The bank predicts the BoC will recognize the stronger second-quarter performance while continuing to flag trade-related risks at Wednesday's policy meeting.