More BoC cuts could be ahead in 2026
Canada's monetary policy framework has fundamentally shifted. The Bank of Canada will move away from rate hikes and toward cuts next year as inflation stabilizes and employment concerns take center stage, according to IG Wealth Management's 2026 Market Outlook released this month.
The investment firm expects at least one additional 25-basis-point cut from the Bank of Canada in 2026, likely in March. This marks a clean break from the inflation-fighting stance that dominated policy from 2022 through 2024.
"Inflation control is no longer the binding constraint; employment is," the Outlook stated. The shift arrives as the United States Federal Reserve has already begun its own easing cycle, with expectations for four additional cuts through September 2026.
For mortgage professionals, the implications are straightforward: lower borrowing costs should continue flowing through the housing market. The outlook complements fiscal measures the federal government has announced, with Ottawa front-loading spending on housing, productivity and infrastructure.
This dual approach, where both monetary and fiscal policy support economic growth rather than restrain it, creates what IG calls a tailwind for the broader economy.
Philip Petursson, chief investment strategist at IG Wealth Management, said the combination of forces positions Canada favorably.
"Investors can expect the global economy to continue on a positive trajectory in 2026 as we move past the rolling recessionary environment of 2023 and tariff uncertainty over the last year," he said.
On the other hand, trade dispute continues to loom over the market and cloud the housing outlook, according to Royal LePage vice president, research and communications Anne-Elise Cugliari Allegritti.
“We’ve seen borrowing rates improve dramatically over the last two years and we know that in markets that have typically been very undersupplied, there’s lots of inventory available,” Cugliari Allegritti said. “All of those components are working in favour of buyers.
“What’s really holding them back is this uncertainty in the economy. There’s some hesitancy because of the trade dispute with the US. I think what’s really going to change that is some certainty, some sort of vote of confidence from our government that a trade deal can be made or is in the works.”
However, the Canadian dollar is expected to remain relatively stable, trading in a range between US$0.69 and US$0.71, offering predictability for cross-border transactions and trade relationships.
IG's analysis rests on what it identifies as four pillars: monetary easing from central banks, fiscal stimulus from governments, accelerating AI-driven capital investment, and a so-called wealth effect where rising equity markets boost household spending.
The wealth effect proves particularly relevant to housing markets. When stock portfolios gain value, households tend to increase discretionary spending and pursue larger purchases. The highest income quintile, which owns 85% of equities and drives roughly 40% of aggregate consumption, becomes the primary driver of this cycle.
Source CMP
By Liezel Once
