Bank of Canada Expected to Hold Rate at 2.25%

The Bank of Canada is widely expected to maintain its benchmark interest rate at 2.25 percent when it announces its decision on Wednesday, as surging oil prices from the ongoing conflict in the Middle East introduce new inflationary pressures amid signs of economic weakness.

Economists surveyed by Bloomberg unanimously predict the central bank will hold rates steady for a third consecutive meeting, aligning with market expectations reflected in overnight index swaps that show little chance of a near-term change. The decision comes during the bank's second policy meeting of 2025, following a quarter-point cut to the current level in October 2024. Governor Tiff Macklem stated after that adjustment that rates were at an appropriate level to support growth while containing price pressures.

The global oil price spike, driven by the war involving Iran and disruptions in key shipping routes like the Strait of Hormuz, has pushed Brent crude above $100 per barrel and May crude contracts to $95.53. In Canada, gasoline prices have risen more than 30 percent this year, reaching their highest since 2024. This has strained household budgets and raised concerns about headline inflation...