Bank of Canada Likely to Stay on Hold as Oil Scrambles the Outlook

Tiff Macklem, governor of the Bank of Canada Photo by David Kawai /Photographer: David Kawai/Bloomb

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(Bloomberg) — The Bank of Canada is likely to hold interest rates steady as policymakers weigh the inflation risk of higher oil prices against a string of weak economic numbers.

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Economists surveyed by Bloomberg are unanimous in saying Governor Tiff Macklem and his council will keep the policy rate at 2.25% for a third straight meeting on Wednesday. That’s the market’s expectation too. 

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Since October, policymakers have said borrowing costs are in the right place to support an economy that’s reeling from US tariff policy while keeping price pressures contained. 

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Now, the war in the Middle East has caused a spike in oil prices, adding inflation risk and uncertainty for central banks globally. But for the Bank of Canada, it’s likely too early to signal any new direction.

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“The Bank of Canada won’t rush to respond without clarity on size and duration of the oil price shock,” Claire Fan, an economist with Royal Bank of Canada, wrote in a report to investors. 

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The central bank won’t be giving updated forecasts this week, allowing officials to sidestep the question of which way rates should go next. The central bank’s January forecasts for growth and inflation assumed a Brent crude price of $60 per barrel. On Tuesday, the benchmark was trading at $102. 

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Domestically, gasoline prices have already climbed more than 30% this year to the highest level since 2024, taking a major chunk out of household budgets. Canada is also facing other headwinds, such as slowing population growth and trade war damage, which led the economy to contract at a 0.6% annualized rate in the fourth quarter of 2025. 

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The country shed 83,900 jobs in February, the biggest monthly decline in four years. Steel, aluminum and auto exports to the US have been crimped by US duties. Housing resales are weak, prices are falling in a number of regions, and condo markets in the largest cities are in the midst of a full-blown correction.

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Despite the soft numbers, not a single economist in the Bloomberg survey expects the bank to cut interest rates soon to spur growth. Most see officials keeping rates on hold for the entire year.  

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Seven of 14 respondents in the poll say the conflict in Iran has increased the likelihood of rate hikes. Another seven say the war decreases the likelihood of further cuts or increases the likelihood the bank remains on pause. The survey was conducted between March 10 and 13.

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An oil shock hits differently in Canada, the largest foreign supplier of crude to the US. Higher prices, if sustained, pour revenue into governments and corporate treasuries in energy-rich provinces such as Alberta and Newfoundland, boosting growth in those regions. Four of the 14 economists surveyed have already increased their forecasts for Canadian economic growth this year.