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Bank of Canada holds policy rate at 2.25% as Macklem turns hawkish

Macklem said Canadian rate decisions would be made one at a time, and he flagged the Middle East and US trade ties as key risks.

Reported · Written up by our desk · Central Banks

The Bank of Canada kept its policy rate unchanged at 2.25% on Wednesday, a move described as widely anticipated. In remarks following the decision, Governor Tiff Macklem took a more hawkish tone, signaling policymakers are confident in the outlook for growth and inflation.

Macklem pointed to conflict-related risks in the Middle East and uncertainty tied to the trade relationship with the US, reiterating that the central bank would set decisions sequentially rather than all at once. He also said the Canadian dollar weakness was not a major factor in the rate decision.

The BoC governor said higher oil prices would not be allowed to become persistent inflation, adding that inflation in Canada is expected to ease gradually if global oil prices decline from elevated levels. He warned that if oil prices rise and stay higher, consecutive rate hikes could still be needed, though that was not identified as the base case.

In the currency market, the Canadian dollar showed little reaction to the decision, with USD/CAD hovering around 1.4050 after the announcement. FXStreet also cited BoC expectations for solid second-quarter growth and inflation moving toward target levels into 2027.

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