Bank of Canada Can Let Loonie Weaken and Skip Rate Hikes, BofA Says

Bank of America has suggested that the Bank of Canada can afford to maintain its current monetary policy stance while allowing the Canadian dollar to depreciate further, even if the United States pursues tighter monetary conditions. According to BofA's analysis, the central bank is likely to keep interest rates on hold through most of 2027, prioritizing domestic economic conditions over currency stability. This forecast reflects expectations that the Bank of Canada will maintain a more accommodative policy approach relative to potential US rate increases. The assessment suggests that currency weakness may be an acceptable trade-off for the Bank of Canada as it navigates economic conditions without implementing rate hikes during the projected period.