Canada Monetary Policy Research Brief

Central bank maintains policy stance. The Bank of Canada held its policy rate at 2.25 per cent in March, citing a balance of weaker domestic economic conditions and rising inflation risks. While inflation has eased to 1.8 per cent and core measures are now close to the Bank’s 2 per cent target, recent economic data point to slowing momentum. Canada’s GDP contracted in the fourth quarter, employment losses early in 2026 have surpassed 100,000 positions, and exports remain weak amid ongoing tariff uncertainty. Meanwhile, escalating conflict in the Middle East has driven oil and natural gas prices higher, raising the risk of renewed energy-driven inflation and increased volatility in financial markets. With growth risks tilted to the downside but inflation risks rising due to higher energy costs, the Bank kept rates unchanged while it continues to monitor the economic impacts of global trade tensions and the evolving geopolitical environment.