The central bank's governing council held firm at 2.25%, but flagged the situation could shift fast
Canada's central bank was prepared to wait before adjusting interest rates ahead of its April 29 decision, but its policymakers were under no illusions that the calm could be short-lived.
Minutes released Wednesday from the Bank of Canada's Governing Council laid bare the thinking behind the widely anticipated decision to hold the benchmark rate at 2.25%.
The move was widely anticipated, but it came against a backdrop of mounting global pressures – rising oil prices tied to the Iran conflict, ongoing US tariffs, and deepening uncertainty over the future of the Canada–US–Mexico Agreement (CUSMA).
Together, those forces have kept the domestic economic outlook on uneasy ground.
The six-member council concluded that inflation remained broadly muted despite elevated energy costs, and that the policy rate was modestly stimulative – giving policymakers enough breathing room to absorb the initial shock without acting.
"Members agreed that they had scope to be patient for now, but the situation could change quickly, and monetary policy might need to respond to guard against the risk that inflation broadens and becomes more persistent," the minutes noted.
For Canadian mortgage brokers navigating an already complex rate environment, the message from Ottawa was at once reassuring and cautious.
Variable rates are anchored to the Bank's overnight rate and have held steady since the final quarter of last year, while fixed mortgage rates have been climbing as bond yields respond to global uncertainty.
Read more: Bank of Canada right to hold, says C.D. Howe Institute
Sal Guatieri, director and senior economist at BMO Capital Markets, told Canadian Mortgage Professional the Bank's language made clear it was in no rush to move in either direction. "Today it does look like the Bank of Canada is on hold for the foreseeable future," he said.
"There are of course risks on both sides to that call. If the trade war ends up causing further harm to our economy, the Bank may need to cut rates. But at the same time, the Iran conflict and the resulting rise in oil prices could push inflation higher and the Bank of Canada may need to respond to that."
Guatieri indicated that the hold could extend well into 2027, a scenario that would keep variable rates stable but do little to reverse the recent creep in fixed-rate pricing that has added affordability pressure for borrowers already facing the wave of mortgage renewals in 2026.
The Bank of Canada’s decision to keep interest rates unchanged on Wednesday came as no surprise to the mortgage industry – but it leaves plenty of questions for borrowers weighing up the best choice on interest rates.https://t.co/AslTRsmjBg
— Canadian Mortgage Professional Magazine (@CMPmagazine) May 1, 2026
Two forces pulling in opposite directions
The minutes reflected the council's awareness that it is managing competing threats simultaneously.
Higher crude prices and supply chain disruptions stemming from the Iran war have the potential to push inflation above the Bank's 2% target, a scenario that would normally call for rate increases.
At the same time, the economy is already absorbing the weight of US tariffs, subdued growth, and a GDP contraction of 0.6% in the final quarter of 2025.
"Members agreed that the appropriate monetary policy response depended importantly on two factors: the economic conditions when the shock occurred and the persistence of the shock," the summary of deliberations noted.
The degree of tightening, if required, would hinge on related developments including investment in the energy sector and how the exchange rate responds.
Governor Tiff Macklem, in his remarks accompanying the April 29 announcement, indicated that back-to-back rate increases remained a possibility if broader inflationary pressures materialised.
However, the minutes made clear that any such move would depend heavily on how both US trade policy and the Iran conflict unfold – two variables that remain deeply uncertain.
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