BoC Holds Rates as Inflation Concerns Rise

The Bank of Canada held its benchmark lending rate at 2.25% on Wednesday.

Economists are split on the outlook for this year and 2027 due to inflation concerns and the impact of tariffs on growth.

Desjardins Group's Royce Mendes said the central bank has indicated it doesn't think the latest round of United States tariffs poses a threat to gross domestic product, especially since Ottawa announced support programs.

Mendes noted that the Bank of Canada appeared to suggest the greater threat lies with inflation from higher fuel prices that could spread to other parts of the economy.

Desjardins expects the Bank of Canada to leave rates on hold for the rest of the year and then hike them by 50 basis points to 2.75% in the first half of 2027.

Capital Economics' Stephen Brown said the central bank delivered a more hawkish message, citing increased inflation risks and the potential impact of tariffs.

Brown noted that policymakers acknowledged the escalating trade dispute between the United States and Canada is adding uncertainty at a time when labour demand is still weak.