Bank of America says the Bank of Canada is likely to stay on the sidelines even as the loonie weakens, arguing that currency swings alone won’t be enough to force a policy shift.
Carlos Capistran, head of Latin America and Canada economics at Bank of America, said a soft Canadian dollar has not historically translated into sustained inflation pressure, noting weak domestic demand and a negative output gap leave little room for rate hikes.
On Thursday, the loonie fell as low as $1.417 per U.S. dollar, its lowest intraday level since April 2025. The U.S. dollar also continued to strengthen as oil prices declined.
