The Bank of Canada announced on Apr. 29 that it will keep its target for the overnight rate at 2.25 percent, with the Bank Rate set at 2.5 percent and the deposit rate at 2.20 percent.
This decision comes as ongoing conflict in the Middle East and changes in United States trade policy contribute to heightened volatility and uncertainty in global markets. The Bank’s latest outlook assumes tariffs remain unchanged and forecasts a decline in global oil prices to $75 per barrel by mid-2027.
The statement from the Bank noted, “The evolving conflict in the Middle East is causing heightened volatility and US trade policy continues to reshape global trade patterns. Both are ongoing sources of uncertainty.” It added that recent increases in energy prices have raised inflation worldwide, while growth prospects for oil-importing countries have diminished.
Financial conditions have been volatile due to daily developments related to the war, affecting market expectations for inflation and interest rates. Bond yields have risen modestly since January, equity markets initially weakened but later recovered, and the US dollar has appreciated against most major currencies.
Canada’s economic outlook remains largely unchanged from previous projections. After a contraction late last year, growth is expected to resume early this year, supported by consumer and government spending but weighed down by tariffs and trade uncertainty impacting exports and business investment. Housing activity has slowed due to weak population growth, economic uncertainty, and affordability issues; meanwhile, employment growth remains subdued with job losses seen particularly in sectors affected by US tariffs.
According to projections released by the Bank of Canada, GDP is expected to grow by 1.2 percent this year before rising gradually over subsequent years as export activity improves along a lower trajectory than previously anticipated.
Inflation rose sharply in March due primarily to higher gasoline prices but core inflation has remained just above two percent recently; most components of Canada’s Consumer Price Index basket show slower price increases than earlier months.
Governor Tiff Macklem said: “We are closely monitoring the impact of the conflict in the Middle East and how the economy is responding to US tariffs and trade policy uncertainty… As the outlook evolves, we stand ready to respond as needed.” He also emphasized that maintaining Canadians’ confidence in price stability remains a priority during this period of upheaval.
The next scheduled announcement regarding interest rates will take place on June 10; an updated Monetary Policy Report will be published on July 15.
The Bank of Canada strives to maintain price stability and foster economic growth by overseeing monetary policy and financial systems according to its official website. Macklem has served as governor since his appointment on June 3, 2020 according to its official website. The institution collaborates with university students through initiatives such as monetary policy simulations known as Governor’s Challenge according to its official website. Additionally, it manages currency circulation alongside digital payments regulation as outlined on its official website, operating within Canada’s financial sector with a focus on monetary oversight according to its official website.
