Policy Watch: July BoC Preview

Research evidence excerpt

Policy Watch: July BoC Preview

Nomura | Policy Watch 10 July 2026

Fig. 5: Two consecutive monthly increases in employment are Fig. 6: The unemployment rate has ticked down lately, but

likely to alleviate concerns about a sharp deterioration in labor remains elevated

market conditions

Source: StatsCan, Haver, Nomura

Significant changes to the MPR projections are unlikely

The BoC will also publish an updated economic forecast. Owing to the heightened

uncertainty surrounding the renewed conflict in the Middle East and ongoing USMCA

negotiations, we do not expect significant revisions to the baseline outlook.

However, risks are tilted toward modestly dovish adjustments, particularly to the near-term

growth forecast. The Bank could also place greater emphasis on the downside risks

surrounding household spending, business investment and hiring, while retaining caution

around the inflationary implications of geopolitical developments.

Macklem is likely to tread cautiously

At the Junemeeting, Governor Macklem highlighted the policy dilemma created by

downside risks to growth and potential upside risks to inflation. That dilemma persists, and

the overall outlook has not changed materially since then.

Macklem noted that upside inflation risks had diminished following the ceasefire

announcement between the US and Iran, but the subsequent resumption of the conflict

could make him more cautious about relying too heavily on that assessment.

Considering the competing risks, Macklem is likely to emphasize that policy remains

appropriately positioned and that the Bank can respond as the outlook evolves.

Forward guidance and communications in focus

Macklem is unlikely to offer hints about the direction of the BoC’s next move, while

emphasizing elevated uncertainty.