{"id":4480,"date":"2026-06-05T00:16:00","date_gmt":"2026-06-05T00:16:00","guid":{"rendered":""},"modified":"2026-06-05T17:24:21","modified_gmt":"2026-06-05T17:24:21","slug":"forward-guidance-our-weekly-preview","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/forward-guidance\/forward-guidance-our-weekly-preview\/","title":{"rendered":"Bank of Canada to hold interest rates as prices rise but economy wobbles"},"content":{"rendered":"\n
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FG for the week of June 8th<\/sup><\/strong><\/p>\n\n\n\n

We have some key data releases in the week ahead, but the focus will be on the Bank of Canada\u2019s decision on interest rates on Wednesday where we expect a fifth consecutive hold.<\/p>\n\n\n\n

The surge in oil prices has sent inflation back above the central bank\u2019s 2% target. But, there is nothing the BoC can do about global oil prices, and there\u2019s little evidence so far that higher energy prices are filtering into broader measures of underlying inflation. The BoC\u2019s preferred core inflation measures surprised broadly to the downside in April.<\/p>\n\n\n\n

And, growth has also surprised in the same direction. Gross Domestic Product marked a second consecutive quarterly decline, edging down 0.1% annualized in Q1\u2014well below the BoC\u2019s April estimate for a 1.5% increase, building on a 1% decline in Q4.<\/p>\n\n\n\n

We continue to think the broader Canadian growth backdrop is more resilient than implied by headline GDP readings. Controlling for a sharp slowing in population, per-capita GDP increased in Q1, and overall consumer spending advanced a solid 1.5%. <\/p>\n\n\n\n

Higher oil prices are raising consumer costs, but they are also increasing revenue flowing into the economy. During past periods of large changes in oil prices, the BoC put more emphasis on real gross domestic income\u2014essentially the amount of goods\/services that can be purchased with domestic production. That measure rose 2.7% in Q1, because a spike in oil prices means a larger quantity of imports can be purchased with the same quantity of exports.<\/p>\n\n\n\n

The unemployment rate in May was 6.6%, down from 6.9% in April but still elevated. Critically, layoffs have continued to decline, but hiring demand has been soft with new labour market entrants still struggling to find work. Hours worked rose 0.6% in May after remaining flat in April, suggesting labour market conditions are improving gradually rather than deteriorating.<\/p>\n\n\n\n

That said, there have been enough cracks in growth and labour market data for the BoC to remain cautious about changing policy rates too quickly in one direction or another. We continue to expect the BoC to remain on hold for the rest of 2026 with our current base case forecast expecting the next move to be a hike, but not until 2027 and contingent on growth and the labour market improving into year end.<\/p>\n\n\n\n

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