Bank of Canada Holds at 2.25% Amid Oil Shock
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- Bank of Canada is expected to keep its benchmark rate at 2.25% for the sixth consecutive meeting, according to the article by Mark Rendell.
- West Texas Intermediate crude was trading around US$80 a barrel on Tuesday, up from roughly US$70 last week after the Strait of Hormuz was once again closed to most tanker traffic — still well below the US$110 reached in April.
- Canadian headline inflation rose to 3.2% in May, the first time it has topped 3% since late 2023, driven by rising gasoline prices.
- Core inflation measures remained close to the Bank of Canada's 2% target, suggesting the energy price shock has not broadened into other goods and services.
- Financial markets are pricing in the central bank remaining on hold through summer and fall before raising the policy rate by a quarter-point in December.
- Tiff Macklem is expected to reiterate that the Bank of Canada will remain 'nimble' and could adjust rates if needed, while the bank simultaneously publishes its quarterly Monetary Policy Report with new inflation and growth forecasts.
Why it matters: Headline inflation has crossed 3% for the first time since 2023 while markets still price in a quarter-point BoC rate hike in December — so today's hold masks a hawkish undertone: if oil stays volatile and core inflation drifts upward, Macklem's 'nimble' language could quickly turn into a pre-commitment to tighten before year-end.
