Bank of Canada Expected to Return to Rate Hikes in December, Says Scotiabank

11:53 AM EDT, 09/10/2026 (MT Newswires) -- The Bank of Canada is expected to begin raising interest rates with a 25-basis-point hike in December, according to Scotiabank Economics in a note. Although an October rate increase remains possible, it is not Scotiabank's base case. Elevated trade uncertainty with the United States and contained core inflation give the BoC room to wait for clearer evidence before acting, wrote Scotiabank in a late-Wednesday note. The case for eventual tightening has strengthened as the Canadian economy has outperformed expectations, said the bank. Strong second-quarter growth, upward first-quarter revisions, firmer consumption and rebounding exports suggest earlier weakness was temporary, while higher oil prices are boosting incomes and adding a temporary inflationary impulse. The latest US tariffs and Canada's retaliation pose a key risk to business confidence and investment, but their direct economic impact should be significantly smaller than under the broader tariff threats considered earlier, added Scotiabank. The timing of rate hikes remains uncertain, but the direction is clearer. With growth strengthening and inflation risks tilted upward, Scotiabank expects the BoC to gradually withdraw monetary stimulus this year.