Bank of Canada holds rate at 2.25% for fifth straight decision

The Bank of Canada kept its benchmark interest rate unchanged at 2.25 per cent on Wednesday for a fifth consecutive meeting

Governor Tiff Macklem said the economy weakened more than expected in the first quarter, pointing to uncertainty from U.S. trade policy and geopolitical tensions, including the war in Iran. He also noted that higher global oil prices, driven by conflict in the Middle East, are pushing inflation above earlier forecasts.

Inflation rose to 2.8 per cent in April, mainly due to higher energy costs. The Bank now expects inflation to remain near 3 per cent in the coming months before gradually easing back toward its 2 per cent target.

Macklem said there is limited evidence that higher energy prices are spreading into broader inflation, and the Bank will continue to look through short-term shocks while watching for longer-term pressures.

Statistics Canada reported a 0.1 per cent contraction in GDP in the first quarter, following a decline in late 2025, raising concerns about a possible recession. However, Macklem pointed to stronger recent job data, saying the labour market remains broadly stable.

Economists say the Bank is taking a cautious stance, with KPMG’s Ali Jaffery calling the tone “dovish,” while CIBC’s Andrew Grantham said rates are likely to stay unchanged through 2026 as policymakers wait for clearer economic signals.