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# Bank of Canada Holds Overnight Rate at 2.25% and Warns Oil-Driven Inflation Could Force Consecutive Hikes
- URL: https://www.theglobalbanker.com/bank-of-canada-holds-overnight-rate-2-25-percent-april-2026-oil-warning/
- Published: 2026-04-29T15:30:00.000Z
- Updated: 2026-10-01T23:26:16.000Z
- Description: The Bank of Canada held its overnight rate at 2.25% and warned that consecutive hikes could be needed if higher energy prices start to become ongoing generalised inflation.
- Author: TGB Editorial Team
- Tags: Central Banks, Americas

The Bank of Canada held its overnight rate target at 2.25% on Wednesday, keeping the Bank Rate at 2.5% and the deposit rate at 2.20%, while Governor Tiff Macklem said consecutive rate increases could be needed if higher energy prices began to become ongoing generalised inflation.

Governor Tiff Macklem told reporters after the decision that the Governing Council was prepared to act if higher energy prices fed through into broader inflation, warning specifically that consecutive rate hikes were possible if energy prices stayed high. He added that further cuts could be needed if the United States imposed significant new trade restrictions on Canada, and that in the base case any changes in the policy rate were expected to be small.

#### INFLATION SPIKE ON THE HORIZON

According to the Bank's projections, CPI inflation is expected to rise to about 3% in April before easing back to the 2% target by early 2027\. The Bank attributes the rise to sharply higher gasoline prices following the war in the Middle East. 

The Bank projected 2026 GDP growth at 1.2% and said the unemployment rate remains in the 6.5% to 7% range. Mr Macklem said uncertainty was unusually elevated and that monetary policy may need to be nimble.

#### LOOKING THROUGH THE IMMEDIATE IMPACT

The Governor said that, after more than a year with inflation close to the 2% target, higher global energy prices were pushing inflation up, and that the Governing Council had agreed to look through the war's immediate impact on inflation but would not let higher energy prices become persistent inflation. The Bank said there was so far little evidence that higher oil prices had fed through more broadly to other goods and services prices, and that longer-term inflation expectations remained anchored.

Mr Macklem said that if the baseline holds, with oil prices coming down and US tariffs remaining at current levels, a policy rate close to current settings looks appropriate, and that if the economy evolves broadly in line with the base case, changes in the policy rate can be expected to be small.

The Bank's next scheduled rate announcement is on 10 June 2026, and its next Monetary Policy Report will be released on 15 July 2026.