Royal Bank of Canada (RBC) chief economist Francis Donald has recently released an updated research note on the outlook for monetary policy. He predicts that the Bank of Canada may raise interest rates four times next year, pushing the policy rate up to 3.25%, and warns that the first rate hike could even be brought forward to the end of 2026.
This aggressive shift significantly breaks the market’s previous expectation of a more accommodative stance. Despite uncertainty surrounding trade between the U.S. and Canada, and forecasts that Canada’s GDP growth rates in both the current and coming years will remain below 2%, slower population growth makes real output per capita more resilient. Combined with growth momentum from resource-rich western provinces, potential upside risks in energy prices are prompting the central bank to guard against second-round inflation pressure, highlighting the persistence of structural inflation.
From a macro-financial perspective, if major central banks restart a rate-hike cycle, it would directly lift sovereign bond yields and provide support for the domestic currency. Such policy divergence not only tightens global liquidity conditions by shrinking the window of easier financial conditions, but also sends a hawkish signal to the market—either indicating a tightening cycle is still in effect or that it has not yet fully ended—continuing to weigh on the upside space for overvalued risk assets.
For the crypto market, $BTC is extremely sensitive to marginal changes in liquidity, as are most mainstream altcoins. With major economies facing the shadow of prolonged high interest rates (“Higher for Longer”) and even a potential restart of rate hikes, the inflow of incremental capital will be tightly constrained. Investors should be highly alert to a second hit to risk-asset valuations driven by macro liquidity tightening.📉
#BankOfCanada #MacroEconomy #InterestRates #CryptoLiquidity
This aggressive shift significantly breaks the market’s previous expectation of a more accommodative stance. Despite uncertainty surrounding trade between the U.S. and Canada, and forecasts that Canada’s GDP growth rates in both the current and coming years will remain below 2%, slower population growth makes real output per capita more resilient. Combined with growth momentum from resource-rich western provinces, potential upside risks in energy prices are prompting the central bank to guard against second-round inflation pressure, highlighting the persistence of structural inflation.
From a macro-financial perspective, if major central banks restart a rate-hike cycle, it would directly lift sovereign bond yields and provide support for the domestic currency. Such policy divergence not only tightens global liquidity conditions by shrinking the window of easier financial conditions, but also sends a hawkish signal to the market—either indicating a tightening cycle is still in effect or that it has not yet fully ended—continuing to weigh on the upside space for overvalued risk assets.
For the crypto market, $BTC is extremely sensitive to marginal changes in liquidity, as are most mainstream altcoins. With major economies facing the shadow of prolonged high interest rates (“Higher for Longer”) and even a potential restart of rate hikes, the inflow of incremental capital will be tightly constrained. Investors should be highly alert to a second hit to risk-asset valuations driven by macro liquidity tightening.📉
#BankOfCanada #MacroEconomy #InterestRates #CryptoLiquidity