The Bank of Canada is widely expected to keep its key interest rate unchanged this Wednesday, with most economists forecasting the benchmark rate will remain at 2.25%.
It would mark the fourth straight hold, as policymakers weigh slower economic growth against fresh inflation pressures caused by higher global oil prices linked to the Iran conflict.
Markets and economists believe the central bank is likely to stay cautious for several reasons:
- Canada’s economy remains soft and growth has been weak
- Unemployment is still elevated
- Inflation had been easing earlier this year
- But rising gas and energy costs are creating new pressure
Because of that mixed picture, the Bank is expected to wait for more data before making its next move.
The war in the Middle East and disruption around the Strait of Hormuz have pushed oil prices higher, which affects Canadians through:
- Higher gasoline prices
- More expensive transportation
- Potential grocery cost increases
- Rising business costs
Canada’s inflation rate rose to 2.4% in March, up from 1.8% in February, partly due to energy prices.
Tiff Macklem is expected to emphasize that the Bank is watching whether temporary price spikes become long-term inflation.
The Bank usually avoids reacting to short-term oil shocks immediately, but if businesses and consumers start expecting permanently higher prices, it may need to respond later.
Some economists say that if oil prices calm down and inflation eases again, rate cuts could return later. Others think the Bank may stay on hold for much of 2026.
Right now, the message is likely to be: wait, watch, and be cautious.
If rates stay at 2.25%:
- Variable mortgage holders likely see no change
- Borrowing costs remain stable
- Savings account rates may stay similar
- Housing market pressure may remain mixed
The Bank of Canada appears set to pause again, balancing two big forces: a weak economy and rising inflation risks. Wednesday’s announcement will be watched closely for clues about what comes next.