Economists believe that the Bank of Canada (BoC) is widely expected to retain rates on hold on Wednesday 25 March. This is despite fears of higher inflation following the spike in crude oil prices, stemming from the Middle East war.
Canada’s inflation is around 2%. That is the midpoint of BoC’s control range of 1% to 3%. The policy rate of 2.25% is considered stimulative in a weak economy. Economists currently view the risks in Canada’s economy as balanced.
The Central Bank lowered the benchmark policy rate to 2.25% in October ’25. The rate has remained unchanged since then.
The deputy chief economist of Desjardins, Randall Bartlett, said that we think that the bank may stay on hold at this meeting. Furthermore, the bank is likely to stay on hold through the end of the year.
Bartlett added that the implications for inflation due to the oil shock are uncertain. He added that it may be too early for the BoC to react without first flagging the developing risks.
Governor Tiff Macklem in his last rate announcement stressed that it was difficult for the Governing Council to decide on the trajectory for monetary policy. This was due to uncertain economic conditions besides geopolitical risks, such as inflationary pressures and fluctuating consumer confidence, which complicate the decision-making process for the Governing Council.
Money markets are not pricing in a rate cut this year. It’s betting on a 25-basis-point rate hike in December ’26.
The BoC is expected to announce its monetary policy decision at 0945hrs EST (1345hrs GMT).
The war in the Middle East has witnessed crude oil prices soaring. The price of Brent crude oil has risen by more than 40% to USD 102.65 since the U.S. and Israel attacked Iran on Saturday, 28 February ’26.
Canada, being a net exporter of crude oil, is likely to benefit from higher oil prices. However, the cost of gasoline will also surge, which may cause a dent in disposable income, particularly for consumers who rely heavily on driving for their daily commutes and expenses.
