The Bank of Canada is poised to raise its benchmark interest rate for the first time since July 2023, according to widespread expectations in financial markets and a Reuters poll of economists. The anticipated move would see a quarter-point hike in the policy rate, which has remained at 2.25% for nearly a year. Economists generally view this level as providing a modest boost to the economy.
Despite a tariff dispute with the United States potentially hampering economic growth, the Bank of Canada has expressed growing concerns about inflation driven by the ongoing war in the Middle East. Monetary policymakers have indicated they would overlook the initial inflationary spike linked to rising energy prices but would act if price pressures extended beyond fuel costs.
Alongside the rate decision, the Bank of Canada will release updated forecasts for inflation and economic growth. This announcement comes amid a backdrop of uncertainty, with the central bank balancing the need to support economic activity against the risks of rising inflation.