The Bank of Canada Holds Interest Rate at 2.25%

The Bank of Canada Holds Interest Rate at 2.25% as expected, and any changes in the rate could be small if its projections for the economy hold true. Some key takeaways from Governor Macklem’s statement:

• The BOC, which has kept its rate at 2.25% since last October, says the overall effect of the war on Canada will be modest. High oil prices benefit Canada by increasing export revenues while squeezing businesses and consumers.

• Governor Macklem stated, “if oil prices stayed high and began pushing up inflation, it might have to respond with consecutive rate hikes.”

• Inflation in April is expected to shoot up to about 3% from 2.4% in March while averaging around 2.3% for this year.

• The bank lifted its 2026 growth forecast to 1.2% from the 1.1% it had predicted in January. Rising to 1.6 per cent in 2027 and 1.7 per cent in 2028.

• The Governing Council will be closely watching inflation expectations, Macklem said, adding the rate-setting team estimates inflation to be back to the bank's 2% target by early next year.

• Macklem said the fate of the United States-Mexico-Canada free trade deal, the Middle East war, the impact of U.S. tariffs and knock-on effects of higher crude would determine the course of monetary policy.

The Bank of Canada will make its next interest rate decision on June 10th