Bank of Canada Maintains Key Interest Rate at 2.25%

10:17 AM EDT, 04/29/2026 (MT Newswires) -- The Bank of Canada held its key interest rate at 2.25% on Wednesday, due to "heightened volatility" caused by the Middle East conflict and U.S. trade policy reshaping global trade patterns. "Both are ongoing sources of uncertainty," it said.

The Bank said Governing Council is looking through the war's immediate impact on inflation but will not let higher energy prices become persistent inflation. "As the outlook evolves, we stand ready to respond as needed. The Bank is committed to maintaining Canadians' confidence in price stability through this period of global upheaval," it added.

The economic growth outlook for Canada is unchanged from the January monetary policy report projections, the BoC's statement said.

The statement added: "After a contraction in the fourth quarter of 2025, growth is forecast to have resumed in early 2026. Consumer and government spending are supporting economic activity, while tariffs and trade uncertainty are weighing on exports and business investment. Housing activity declined in the fourth quarter and is being held back by slow population growth, economic uncertainty and ongoing affordability issues. The labour market is soft, with subdued employment growth over the past year and job losses in sectors targeted by US tariffs. The unemployment rate remains in the 6.5% to 7% range, reflecting both weak hiring and fewer job seekers.

"The Bank's April forecast projects GDP growth of 1.2% in 2026, rising to 1.6% in 2027 and 1.7% in 2028 as growth in exports and business investment resumes along a lower trajectory. With GDP growing slightly above potential, the current excess supply in the economy is gradually absorbed. While the war in Iran may alter its composition, overall GDP growth is little changed in the updated forecast: Since Canada is a large net exporter of oil, higher oil prices increase national income even as consumers are squeezed by higher gasoline prices.

"CPI inflation climbed to 2.4% in March because of sharply higher gasoline prices. The March increase follows several months of slowing inflation data. Core inflation has been easing and held steady at just above 2% in the most recent inflation report. The proportion of components of the CPI basket rising above 3% has also declined in recent months. As expected, so far there is little evidence that oil prices have fed through more broadly to goods and services prices, but this warrants close attention in the months ahead. Near-term inflation expectations have moved up with higher gasoline prices and still-elevated food price inflation, but longer-term inflation expectations have remained anchored.

"CPI inflation will likely rise further in April to about 3%. Based on the assumption that oil prices will ease, inflation is forecast to come down to the 2% target early next year and remain around 2% over the projection horizon."

Against this backdrop and taking into account the current projection, Governing Council decided to maintain the policy rate at 2.25%.

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