RBC Expects BoC To Recognize "Growing External Uncertainty" Around Oil Prices, But Not Rush To Respond, Amid More Signs of Easing Inflation Pressure in Canada

10:36 AM EDT, 03/16/2026 (MT Newswires) -- At Wednesday's policy meeting, RBC expects the Bank of Canada to recognize "growing external uncertainty" around the oil price, but continue to hold the overnight rate at its current, borderline accommodative level of 2.25%.

These comments Monday from RBC come as it noted data released earlier today showed Canadian headline inflation slowed to 1.8% year over year in February. Though, RBC said, comparisons were distorted by last year's GST/HST holiday, which extended through mid-February, biasing food prices higher, and also the removal of the consumer carbon tax in April 2025, which depressed energy consumer price index.

According to RBC, the BoC's core trim and median CPI measures, which exclude volatile monthly swings and indirect tax changes, offer "clearer reads". In February, RBC noted, they continued to ease and averaged 2.3% year-over-year, the slowest pace in almost five years. On a three-month annualized basis, RBC also noted, these measures averaged just 1% in February, well below the BoC's 2% target.

"While the moderation in those core CPI measures is welcome as it suggests easing demand-driven inflation pressure, Canadian households continue to face supply-side headwinds, particularly in grocery items like beef and coffee, where production disruptions from adverse weather take time to resolve," said RBC.

That, RBC added, won't be the last of supply-driven inflation as elevated oil prices from ongoing Middle East tensions will translate into higher energy inflation in March. However, RBC doesn't expect the BoC to rush to respond until gaining more clarity on the scope, duration, and growth-inflation trade-off of the current shock.

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