The Bank of Canada left its key policy rate unchanged at 2.25% on Wednesday, as policymakers weighed a difficult mix of softer Canadian growth and rising global inflation risks tied to the war in the Middle East.
It marked the third consecutive time the Bank had held its key rate unchanged, with the last move – a reduction - coming in October.
In its accompanying statement, the Bank said the Canadian economy is still expected to post modest growth as it works through the effects of U.S. tariffs and broader trade uncertainty. However, recent data indicate that the near-term outlook has weakened since the Bank’s January forecast. The Bank pointed to a soft labour market and sluggish trade performance as signs that economic momentum has faded in early 2026.
February inflation slowed to 1.8%, down from 2.3% in January, and core measures were described as close to 2%. Still, the February inflation report did not reflect the start of the war in Iran, and the Bank said the recent jump in gasoline and broader energy prices will likely push global inflation higher in the near term – even if the impact on the Canadian economy remains uncertain.
“Since the outbreak of the conflict in the Middle East, global oil and natural gas prices have risen sharply, and this will boost global inflation in the near-term,” the Bank said. “In addition to energy supply disruptions, transportation bottlenecks stemming from the effective closure of the Strait of Hormuz could impact the supply of other commodities, such as fertilizer.”
Today’s rate decision was widely expected. Economists had largely anticipated the Bank would stay on hold, arguing that inflation was still close to target and that the economy remained too fragile for a rate increase, even as oil-related risks grew.
For Canadian farmers, the hold is a mixed signal. On one hand, steady rates may help keep operating loan and machinery financing costs from rising further. That matters for farms carrying significant debt or planning land, equipment, or input purchases. On the other hand, the Bank’s warning about energy and possible fertilizer supply disruptions is important for agriculture, because higher fuel and fertilizer costs could squeeze margins even without another rate hike.
FCC has noted that interest-rate levels remain a major factor for Canadian business borrowing and renewal costs in 2026.
