Bank of Canada Holds Rate at 2.25%, Macklem Backs Diversification

OTTAWA Bank of Canada Governor Tiff Macklem expressed encouragement Wednesday over the federal government's efforts to diversify the economy and shield it from frequent global trade disruptions, following the central bank's decision to keep its benchmark interest rate unchanged at 2.25 per cent for a fourth straight meeting.

Macklem shared the views in an interview after the bank released its updated economic projections. Inflation measured 2.4 per cent in March, driven by a global oil price surge affecting fuel costs and persistent food price increases. The bank's baseline forecast anticipates inflation peaking near three per cent this April before returning to the two per cent target by early 2027, assuming oil prices moderate. Persistent high oil prices around US$100 per barrel through the year could trigger broader inflation, prompting multiple rate hikes, officials cautioned.

Two key risks loom over the outlook: an energy price spike tied to the war in Iran and uncertainty surrounding the upcoming review of the Canada-U.S.-Mexico trade agreement. These factors could steer the policy rate higher, lower or steady, Macklem noted. "We are in a more shock-prone world," he said....