Bank of Canada holds at 2.25% and looks through the oil price jump

On April 29, 2026, the Bank of Canada held its target for the overnight rate at 2.25%, alongside a new Monetary Policy Report.

Bank of Canada April 2026 forecast: GDP growth

Key points

• The Bank projects GDP growth of 1.2% in 2026, 1.6% in 2027 and 1.7% in 2028. Higher oil prices hurt consumers at the pump, but as a large oil exporter Canada’s national income rises.
• CPI inflation rose to 2.4% in March because of gasoline prices and is likely to reach about 3% in April. Assuming oil eases to US$75 a barrel by mid-2027, inflation should return to 2% early next year.
• Housing activity declined in the fourth quarter, held back by slow population growth, uncertainty and affordability.
• Unemployment stayed in the 6.5%–7% range.

The Bank said it is “looking through the war’s immediate impact on inflation but will not let higher energy prices become persistent inflation.”

For Calgary homeowners

Another hold means no change for variable-rate payments. The Bank’s warning on inflation is a reminder that further cuts are not guaranteed, so buyers should plan payments at today’s rates rather than counting on lower ones.

The global picture

The Bank said the war in Iran has led to sharply higher energy prices and transportation disruptions, which reduce growth in oil-importing countries and push up inflation worldwide. Its outlook assumes tariffs stay where they are and oil falls to US$75 a barrel by mid-2027. Growth in the United States is still expected to be solid, China is supported by robust exports, and higher oil and gas prices weigh on the euro area. Overall, the global economy is expected to grow by about 3% in each of 2026, 2027 and 2028.

Financial markets have been volatile. Bond yields are modestly higher than in January, and equity markets, which fell sharply when the war began, have recovered. The US dollar has gained against most major currencies, while the Canada-US exchange rate has been relatively stable.

Canada: modest growth, soft jobs

After the economy contracted in the fourth quarter of 2025, the Bank believes growth resumed in early 2026. Consumer and government spending are supporting activity, while tariffs and trade uncertainty weigh on exports and business investment. The labour market is soft, with subdued job growth over the past year and job losses in sectors targeted by US tariffs.

Higher oil prices cut both ways. Consumers pay more for gasoline, but because Canada is a large net exporter of oil, national income rises. That is particularly relevant to Alberta and Calgary, where the energy sector plays a large role in the economy. The Bank expects GDP to grow slightly above potential, so the current excess supply in the economy is absorbed only gradually, which limits pressure on prices from domestic demand.

Inflation: watching for spillover

The March jump came after several months of slowing inflation. Core inflation held steady at just above 2%, and the share of CPI components rising faster than 3% has declined. The Bank sees little evidence so far that oil prices are spreading to other goods and services, but says this warrants close attention. Near-term inflation expectations have risen with gasoline and food prices, while longer-term expectations remain anchored.