Bank of Canada Maintains Policy Rate at 2.25%
On Wednesday, March 18, 2026, the Bank of Canada held its target for the overnight lending rate steady at 2.25% for the third consecutive time, a decision widely expected by analysts.
The Bank was quick to mention the ongoing conflict in the Middle East and the uncertainty surrounding the outlook on energy prices and general economic impact.
The breadth, and in particular duration, of the conflict will be critical variables going forward insofar as how much they weigh down global growth while also raising global inflation.
The Bank noted that global bond yields had risen – which risks a rise in mortgage rates at some point, as fixed rate mortgages are based on the bond market.
Economic growth in Canada turned negative in the fourth quarter, contracting 0.6%, which was weaker than the Bank expected. The Bank expects growth in the near term to remain weaker than originally anticipated due to softness in the labour market and exports.
The CPI eased to 1.8% in February and core measures of inflation are trending close to the Bank’s target of 2%. However, the Bank noted that higher energy prices will likely boost inflation in the coming months.
In his opening remarks to the press following the release of the announcement, Governor Tiff Macklem outlined some of the challenges the Bank faces, stating “Economic weakness combined with rising inflation is a dilemma for central banks. Raising interest rates to slow inflation could further weaken the economy. Easing interest rates to support growth risks pushing inflation well above target.”
The Bank noted that it will continue to monitor the evolution of U.S. trade policy and the situation in the Middle East and the impact on both on the Canadian economy and inflation and stands “ready to respond as needed. The Bank is committed to ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.”
The Bank of Canada will make its next scheduled interest rate announcement on April 29, 2026. The Bank’s next Monetary Policy Report will be released at the same time.