Canada Monetary Policy Research Brief

Policy rate held as inflation expected to ease. The Bank of Canada held its overnight rate at 2.25 per cent, saying that the current rate environment remains appropriate to support the early economic recovery underway while guiding inflation back toward its 2 per cent target. Although headline inflation has temporarily accelerated due to higher gasoline prices linked to conflict in the Middle East, underlying price pressures remain considerably more subdued, with core inflation measures continuing to track close to target. As temporary energy-related pressures gradually fade and economic slack persists, the Bank expects inflation to ease over the coming months before returning to approximately 2 per cent in early 2027. Nonetheless, the outlook remains highly sensitive to global geopolitical developments and evolving trade conditions.