The Bank of Canada is widely expected to leave its key overnight lending rate at 2.25 per cent today, as it tries to strike a balance between curbing inflation caused by the war in Iran, and kick-starting a sputtering economy.
A consensus of economists surveyed by Bloomberg said the Bank will leave rates unchanged for the fourth straight meeting. The overnight has been at 2.25 per cent since Oct. 29. The bank dropped rates four times in 2025 as it tried to boost the Canadian economy while it struggled with the impact of tariffs imposed by U.S. president Donald Trump.
The theory is that by making it cheaper to borrow money, consumers — and businesses — will spend more, giving the economy a boost, but also potentially pushing inflation higher.
A report from CIBC economists Katherine Judge and Andrew Grantham said the Bank is also likely to reiterate that it won’t raise rates unless there’s evidence that oil-related inflation is spilling over into the broader economy.
“That still seems unlikely in our book, and data later in the week will likely show the economy continuing to grow at only a modest pace that would reduce slack in the economy only very slowly,” Grantham and Judge wrote.
Last week, Statistics Canada announced that the consumer price index — a broad-based measure of inflation — was 2.4 per cent higher in March compared to a year ago. Among the biggest drivers of increased inflation was a 21 per cent year-over-year increase in the price of gasoline.
Since the war on Iran began in late February with a joint U.S.-Israeli attack in late February, the price of oil has shot up by more than 40 per cent. West Texas Intermediate has risen from $67.02 (U.S.) per barrel to $99.62, while Brent Crude has risen from $72.48 to $104.30.
The Bank will also releases its Monetary Policy Report, a quarterly look at the state of the Canadian and world economies, and where it expects them to go.
