Bank of Canada Holds Policy Rate at 2.25% for Fourth Consecutive Meeting
On Wednesday, April 29, 2026, the Bank of Canada held its target for the overnight lending rate steady at 2.25% for the fourth consecutive time in a decision widely expected by analysts.
The Bank was once again quick to mention the economic impact of ongoing conflict in the Middle East and U.S. trade policy, including the Canada-United States-Mexico Agreement (CUSMA), as well as the uncertainty surrounding the outlook on energy prices.
The Bank noted that global bond yields have risen since January, which has already led to an increase in fixed mortgage rates, as they are based on the bond market.
Of note concerning the housing market, the Bank focused on affordability challenges and the decline in population growth as weighing on demand, while also pointing to weather-related factors that slowed resale activity in the first quarter of the year. In its Monetary Policy Report, the Bank also called out “a substantial inventory overhang of small condominiums in some major centres.”
The Bank’s outlook for economic growth in Canada was little changed from its January projection, highlighting consumer and government spending as tailwinds and exports, business investment, and housing activity as headwinds. The Bank also pointed out a softer labour market, with job losses across sectors affected by U.S. tariffs.
On balance, the Bank sees Canada’s economic growth outlook as unchanged due to the country’s status as a net energy exporter, where higher oil prices increasing national income offset higher prices paid by consumers for gasoline.
Critical to the Bank’s projections are assumptions that tariffs will remain unchanged while oil prices will drop back to $75 per barrel by the middle of next year as the Strait of Hormuz reopens, reflecting market expectations that the increase in oil prices will be short-lived.
The Canadian Price Index (CPI) climbed sharply to 2.4% in March because of higher gasoline prices and is expected to rise to 3% in April. The Bank stated there was little evidence at this point that higher oil prices have fed through to other goods and services, although these pass-through effects take longer and will have to be examined in the coming months.
The Bank also noted it will continue to monitor the evolution of U.S. trade policy, the situation in the Middle East and the impact of both on the Canadian economy and inflation. Following the release of the announcement and Monetary Policy Report, Governor Tiff Macklem stated the Bank “agreed to look through the war’s immediate impact on inflation but if energy prices stay high, we will not let their effects become persistent inflation.”
The Bank of Canada will make its next scheduled interest rate announcement on June 10, 2026. The Bank’s next Monetary Policy Report will be released on July 15, 2026.