Bank of Canada Keeps Rate at 2.25% as Inflation Is Expected to Peak in April
Bank of Canada Keeps Rate at 2.25% as Inflation Is Expected to Peak in April
Ottawa, April 29, 2026 — The Bank of Canada has kept its key policy interest rate unchanged at 2.25%, choosing caution as inflation pressures rise again because of higher global energy prices.
The central bank said inflation is expected to peak at around 3% in April before gradually easing. Officials believe inflation could move back toward the Bank’s 2% target in early 2027, as long as oil prices decline and trade conditions do not worsen.
Why the Bank of Canada Held Rates Steady
The decision shows that policymakers are trying to balance two risks. On one side, higher gasoline and food prices are putting pressure on Canadian households. On the other side, raising interest rates too quickly could slow the economy more than needed.
Governor Tiff Macklem said the current rate appears suitable if the economy follows the Bank’s forecast. However, he warned that future moves could go either way because uncertainty remains unusually high.
Inflation Outlook: A Short-Term Peak
Canada’s inflation rate rose to 2.4% in March, mainly because gasoline and food costs increased. The Bank now expects inflation to climb to about 3% in April. After that, price growth is expected to cool as energy prices ease and shelter costs grow more slowly.
The Bank’s forecast depends heavily on oil prices. Its base case assumes crude oil will fall to about $75 per barrel by mid-2027. If oil stays high for longer, inflation could remain above target and force the Bank to consider higher rates.
Global Risks Are Shaping Canada’s Economy
The Bank pointed to global instability, especially conflict in the Middle East, as a major reason for the recent jump in oil prices. Higher energy prices can hurt consumers, but they can also support Canadian energy exports. This creates a mixed picture for the economy.
Trade uncertainty is another major concern. The Bank’s forecast assumes no major change in U.S. tariffs on Canadian goods. If trade tensions rise, Canadian growth could weaken. If trade talks improve, the outlook could become more positive.
Economic Growth Forecast Slightly Improved
The Bank of Canada now expects the Canadian economy to grow by about 1.2% in 2026, slightly higher than its previous estimate. Growth is projected to improve to around 1.6% in 2027, assuming energy prices ease and trade conditions remain stable.
Even so, the economy is not expected to grow quickly. High living costs, cautious consumers, and uncertainty around exports continue to limit momentum.
What This Means for Canadians
For borrowers, the rate hold means there is no immediate increase in the central bank’s benchmark rate. This may bring some stability to mortgage holders, businesses, and consumers with loans. However, the Bank did not promise that rates will stay unchanged.
If inflation becomes more persistent, rate hikes could return. If the economy weakens sharply, rate cuts could become possible. For now, the Bank is keeping its options open.
Market Reaction
Financial markets had widely expected the Bank to keep rates unchanged. Some investors still believe a small rate increase could happen later this year if inflation remains stubborn. Many economists, however, think the Bank may stay on hold for much of 2026 if inflation cools as expected.
Conclusion
The Bank of Canada’s latest decision reflects a careful approach. Inflation is rising again, but officials believe the increase may be temporary. The key question now is whether energy prices and trade risks will calm down or create a longer-lasting problem.
For Canadian households, the message is clear: interest rates are stable for now, but the path ahead depends on inflation, oil prices, and global trade developments.
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