Canada Monetary Policy Research Brief

Central bank keeps cautious stance amid elevated inflation risks. The Bank of Canada held the overnight rate at 2.25 per cent, as policymakers continued balancing a weak domestic economy against persistent inflationary pressures amid elevated energy prices, geopolitical conflict, and ongoing trade uncertainty. While Canada’s economy contracted modestly in the first quarter and labour market conditions remain soft overall, recent data suggests growth may resume in the second quarter. At the same time, rising oil prices linked to the conflict in the Middle East, coupled with tariff uncertainty and global supply chain disruptions, are expected to keep headline inflation elevated in the near term. As a result, the Bank reiterated its commitment to maintaining price stability and signalled that it remains prepared to respond should inflationary pressures become more persistent.