The Bank of Canada has announced it will hold its interest rate steady at 2.25%, a decision made on March 18, 2026. This marks the second rate hold of the year, following a similar decision in January.
In its statement, the Bank highlighted that the ongoing war in the Middle East has led to increased volatility in global energy prices and financial markets. The situation has heightened risks to the global economy, as noted by the Bank of Canada.
Currently, inflation remains within the Bank’s target range of 1-3%, providing a stable backdrop for the interest rate decision. Maria Solovieva, an economist, remarked, “When inflation is close to the central bank’s target, there is no strong reason to change course.”
The Bank of Canada is closely monitoring the unfolding conflict in the Middle East, with officials stating that the full impact of the war on the economy will depend on its duration and severity. Tiff Macklem, the Governor, emphasized that the closure of the Strait of Hormuz is cutting off a significant amount of global energy supply, which could further complicate the economic landscape.
Interest rates set by commercial banks for loans, including mortgages, are influenced by the Bank of Canada’s minimum benchmark. The Bank has committed to ensuring that Canadians maintain confidence in price stability, even amid global upheaval.
Details remain unconfirmed regarding the potential for a rate hike later in the year, as this will depend on inflation pressures and broader economic conditions. The long-term effects of the Iran war on inflation and the Canadian economy are also not yet clear.
The Bank of Canada has held its interest rate steady for three consecutive meetings since a cut of 0.25 percentage points in October 2025. As the situation evolves, the Bank will continue to assess the impact of U.S. tariffs and trade policy uncertainty on the Canadian economy.
