MNI BoC Review-Apr 2026 - Looking Through Energy Shock For Now

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EXECUTIVE SUMMARY 

The Bank of Canada’s expected overnight rate hold at 2.25% at the April meeting was accompanied by a relatively neutral near-term outlook that highlighted somewhat lopsided two-way risks for rates dependent on the evolution of major geopolitical risks in the coming months.

• The BOC is wary about the Middle East war's medium-term impact on overall price pressures, though no more than might have been expected given that it explicitly says it will “look through” near-term energy inflation and has updated its CPI forecasts accordingly. Governing Council also remains concerned about downside risks to growth stemming from upcoming US trade negotiations.
• But with rates already at the bottom end of the neutral range (which was unchanged at 2.25-3.25% in its annual update), it’s evident that potential upside in rates (BOC: “consecutive increases”) is greater than the downside at this juncture (“may need to…cut further”). For now, as Macklem said, “Maintaining the policy rate today where it is was the right thing to do for today”.
• Against this backdrop, the market’s overall bias in seeing the next move as a hike stayed intact. Following the meeting, OIS pricing was relatively little changed through end-year, still seeing between 1 and 2 overnight rate hikes of 25bp through the December decision, though there was a slight upward bump in pricing for the 3 meetings between July and December.

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• Press Conference Transcript
• Monetary Policy Report
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• Policy Statement Changes