At its March 2026 meeting, the Bank of Canada left its overnight target rate unchanged at 2.25%, in line with both market expectations and its earlier guidance. The Bank stated that the current policy stance remains appropriate given its baseline economic outlook.
However, it noted that the war in the Middle East has increased volatility in global energy prices and amplified risks to the world economy. As a result, the Governing Council emphasized a heightened level of uncertainty, indicating that monetary policy could need to be adjusted in either direction.
The central bank also acknowledged that near-term economic growth will be weaker than it had projected in January, with Canadian GDP contracting by 0.6% in the fourth quarter of last year. Looking ahead, CPI inflation is expected to edge higher in the coming months as trade-related cost pressures and a sharp rise in global energy prices feed through. These effects will be partly offset by recently softer inflation, which slowed to 1.8% in February.
