Bank of Canada Holds Rate at 2.25% Amid Heightened Uncertainty

On April 29, the Bank of Canada kept its benchmark policy rate unchanged at 2.25 %. Minutes released on May 13 said the six-member Governing Council felt it could be patient but acknowledged that conditions could shift quickly. Inflation was described as “largely stayed muted” and close to the 2 % target, while economic growth remained subdued.

Reuters

The Iran war has lifted oil and gasoline prices, raising the risk that energy costs spill into food prices and broader inflation. Simultaneously, U.S. tariffs and the pending CUSMA review add trade uncertainty for Canada.

Reuters

• Loonie at 1.3705 per USD (72.97 cents), down 0.1 % within 1.3685-1.3718 range; U.S. dollar index rose.

Reuters

• April job losses 17,700; unemployment 6.9 % (six-month high).

Reuters

• Crude oil $101.02 per barrel (down 1.1 %); 10-year Canadian bond yield 3.0 % (down 1.5 bps).

Reuters

The minutes noted that members “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.” Governor Tiff Macklem added that the appropriate response “depends importantly on two factors: the economic conditions when the shock occurs and the persistence of the shock.” Future tightening was described as modest and contingent on energy-sector investment and exchange-rate movements.

Reuters

Reitzes warned that rising unemployment suggests the economy cannot absorb higher rates, cautioning against premature tightening. Yet some market participants expect two hikes by December, citing the oil-price surge as inflationary pressure.

BOC Meeting Minutes: Sees future rate adjustments would likely be small.

Reuters said inflation hovered near the 2 % target, while InvestingLive reported CPI rising from 1.8 % to 2.4 % and a possible peak near 3 % in April, showing disagreement on the inflation path.

BOC Meeting Minutes: Sees future rate adjustments would likely be small.

• “The Bank of Canada is comfortable standing pat for now amid heightened uncertainty on both sides of the outlook,” — Benjamin Reitzes, BMO Capital Markets

Reuters

• “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,” — Bank of Canada minutes

Reuters

• “Uncertainty is unusually elevated and there are many possible outcomes. Monetary policy may need to be nimble,” — Tiff Macklem, Governor, Bank of Canada

The Globe and Mail (Toronto)

• “A key underlying message was that policymakers are operating in an unusually uncertain environment and will rely more on judgment and risk management rather than mechanical forecasting models.” — InvestingLive analysis

BOC Meeting Minutes: Sees future rate adjustments would likely be small.

The Bank of Canada’s next scheduled policy decision is on June 10. The council indicated that future moves will be guided by developments in oil prices, trade-policy outcomes, and the persistence of inflationary pressures.

Bloomberg