BoC Set To Keep Rates Unchanged As Focus Shifts To Energy Crisis Fallout
- Energy surge and volatility fuel caution - Rate setters to remain vigilant to geopolitical risks - MPR to raise CPI and temper growth outlook - Rate announcement set for 14:45 GMT/09:45 EST - Press conference scheduled for 15:30 GMT / 10:30 EST
The Bank of Canada’s Governor, Tiff Macklem, is expected to signal a continued preference for holding interest rates at current levels, given the ongoing uncertainty surrounding energy security.
The bank’s Governing Council is widely anticipated to keep the overnight rate unchanged at 2.25% when it announces its decision on Wednesday. The central bank chief is likely to state that policymakers are awaiting a clearer understanding of the crisis's spillover effects and the potential implications for the domestic economy.
The statement accompanying the March decision acknowledged that the nearly three-week-old Middle East conflict had heightened volatility in global energy prices and financial markets, raising risks to the global economy. The tone was cautious regarding the outlook for the year.
In a recent report, TD Securities noted that in March, the Bank of Canada had pointed to the dilemma posed by high inflation and weak growth. "In April, both of these issues appear less pressing. The labour market has shown signs of improvement, with job growth returning to positive territory in March, and recent GDP data suggests Q1 annualised growth in the mid-1% range."
Analysts suggested that the inflationary environment might be less severe than initially expected. "Headline inflation is still likely to peak around 3% this year, but the more subdued performance across core measures in March should provide the bank with more room to look past the headline shock."
Updated Staff Projections
Alongside the rate decision, the Ottawa-based central bank is set to publish its quarterly economic assessment.
TD Securities experts indicated that the Monetary Policy Report (MPR) will provide the first update to the bank's economic projections since the onset of the US-Iran conflict.
"The bank omitted a base-case scenario during previous episodes of heightened uncertainty, such as in April 2020 or April/July 2025, but we don’t think the current situation justifies such treatment. However, the bank’s baseline view on crude oil and its assessment of energy prices as a driver (or headwind) to Canadian economic activity will be key to the April forecasts."
Jan Projections | Source: BoC MPR
Misplaced expectations
Experts noted solid consumer spending and supportive fiscal stimulus as positives for the Canadian economy. However, job growth has stalled, and business investment and the housing market remain subdued. According to Robert Kavcic, senior economist at BMO Capital Markets, this all points to an economy still running below potential, with risks "tilted to the downside."
The economist argued that, absent the conflict in Iran, the domestic situation might have prompted the central bank to consider easing. "Yet, the market continues to price in tightening later in 2026," Kavcic said. "We believe that has likely gone too far, and it would require at least three months of evidence showing that core inflation is rising in the short term and that inflation pressures are broadening. As of March, both of those trends were becoming more favourable."
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- Energy surge and volatility fuel caution
- Rate setters to remain vigilant to geopolitical risks
- MPR to raise CPI and temper growth outlook
- Rate announcement set for 14:45 GMT/09:45 EST
- Press conference scheduled for 15:30 GMT / 10:30 EST
By Harry Daniels
LiveSquawk News
@HarryDaniels71
28 April 2026 | 19:30 GMT
The Bank of Canada’s Governor, Tiff Macklem, is expected to signal a continued preference for holding interest rates at current levels, given the ongoing uncertainty surrounding energy security.
The bank’s Governing Council is widely anticipated to keep the overnight rate unchanged at 2.25% when it announces its decision on Wednesday. The central bank chief is likely to state that policymakers are awaiting a clearer understanding of the crisis's spillover effects and the potential implications for the domestic economy.
The statement accompanying the March decision acknowledged that the nearly three-week-old Middle East conflict had heightened volatility in global energy prices and financial markets, raising risks to the global economy. The tone was cautious regarding the outlook for the year.
In a recent report, TD Securities noted that in March, the Bank of Canada had pointed to the dilemma posed by high inflation and weak growth. "In April, both of these issues appear less pressing. The labour market has shown signs of improvement, with job growth returning to positive territory in March, and recent GDP data suggests Q1 annualised growth in the mid-1% range."
Analysts suggested that the inflationary environment might be less severe than initially expected. "Headline inflation is still likely to peak around 3% this year, but the more subdued performance across core measures in March should provide the bank with more room to look past the headline shock."
Alongside the rate decision, the Ottawa-based central bank is set to publish its quarterly economic assessment.
TD Securities experts indicated that the Monetary Policy Report (MPR) will provide the first update to the bank's economic projections since the onset of the US-Iran conflict.
"The bank omitted a base-case scenario during previous episodes of heightened uncertainty, such as in April 2020 or April/July 2025, but we don’t think the current situation justifies such treatment. However, the bank’s baseline view on crude oil and its assessment of energy prices as a driver (or headwind) to Canadian economic activity will be key to the April forecasts."
Experts noted solid consumer spending and supportive fiscal stimulus as positives for the Canadian economy. However, job growth has stalled, and business investment and the housing market remain subdued. According to Robert Kavcic, senior economist at BMO Capital Markets, this all points to an economy still running below potential, with risks "tilted to the downside."
The economist argued that, absent the conflict in Iran, the domestic situation might have prompted the central bank to consider easing. "Yet, the market continues to price in tightening later in 2026," Kavcic said. "We believe that has likely gone too far, and it would require at least three months of evidence showing that core inflation is rising in the short term and that inflation pressures are broadening. As of March, both of those trends were becoming more favourable."