The Bank of Canada has left interest rates unchanged in its second rate decision of the year, holding steady as it assesses the impact of geopolitical tensions on the economic outlook.
The central bank said on Wednesday morning it was keeping the policy rate at 2.25%, extending a pause that began in December of last year.
That move comes as no surprise to financial markets even despite a surprisingly poor jobs report last week and a drop in the annual rate of inflation to 1.8% on Monday.
The US-Iran war, which began at the end of February, has thrown the central bank a new curveball as it weighs up its approach for the rest of 2026.
A sluggish economy and falling inflation would normally strengthen the case for rate cuts, but observers expected the Bank to hold steady this month because of the risk of an inflationary flareup amid volatile oil prices caused by the Middle East conflict.
Speculation has even grown in recent weeks that the central bank could move sharply into rate-hiking mode in the months ahead if inflation starts to gather pace – but for now that looks a distant prospect.
While today’s decision went largely as expected, much attention will now turn to the next remarks by Bank of Canada governor Tiff Macklem for clues on how decisionmakers are viewing the outlook for the national economy.
Today’s Canadian central bank announcement arrives on the same day as the US Federal Reserve’s second decision of the year, which is also expected to see a rate hold. That announcement is set for 2:00 p.m. ET.
For the Canadian housing market, today’s announcement likely signals little change. Variable mortgage rates and home equity lines of credit (HELOCs) will hold steady, while five-year Government of Canada yields – which lead fixed mortgage rates – have wobbled in recent days as oil prices whipsawed.
Yesterday, the Canadian Real Estate Association (CREA) revealed home prices and sales slipped again last month as the deep freeze gripping the national housing market continued.
CMP
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