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April 29, 2026BANK OF CANADA MONETARY POLICY The Bank of Canada maintained its target for the overnight rate at 2.25%, with the Bank rate at 2.50% and the deposit rate at 2.20%.
The global outlook is impacted by the evolving conflict in Middle East and US trade policies. Inflation is expected to peak in the near term then gradually ease as energy prices decline. US economy is expected to grow at a solid pace with strong consumption and AI investment. Euro area growth is impacted by higher energy prices and US tariffs. The Bank expects China’s GDP growth to remain strong in 2026 and gradually slow with slowing exports offset by strengthening in domestic demand. Global growth is projected to average 3% over the projection horizon. Inflation projections are revised up for 2026 because of the rise in energy prices.
Canadian outlook is little changed form the January Monetary Policy report but is still vulnerable to the war in Middle East and US trade policies. In Canada, GDP growth is expected to have resumed in early 2026 following a decline in the last quarter of 2025. Consumer and government spending are supporting growth, while tariffs and trade uncertainty are weighing on exports and business investment. Housing activity fell in Q4 amid slow population growth and affordability issues.
Growth in GDP is slightly above potential output and the current excess supply in the economy is expected to absorb gradually. Higher oil prices will increase national income as Canada is a large net exporter of oil. Economic growth is projected at 1.2% in 2026, 1.6% in 2027, and 1.7% in 2028, as business investment and exports are expected to resume growth.
The labour market remains soft, with modest employment gains and job losses in tariff-affected sectors. The unemployment rate remains in the 6.5%‑7.0% range, reflecting both weak hiring and fewer job seekers.
CPI inflation rose to 2.4% in March due to higher gasoline prices. Core inflation has been easing and remained stable at just above 2.0%. Near term inflation expectations have moved up due to higher energy prices and still elevated food prices. Longer-term inflation expectations have remained steady. Inflation is expected to come down to 2.0% target in early 2027 and remain around 2.0% over the projected time period.
The Governing Council sees the current policy rate at about the right level to keep inflation close to 2.0% while closely monitoring the impact of the conflict in the Middle East and trade policy uncertainty. If the outlook changes, they are prepared to respond and will be assessing incoming data carefully relative to the Bank’s forecast.
The next scheduled date for announcing the overnight rate target is June 10, 2026. The Bank’s next Monetary Policy Report will be released on July 17, 2026.
Source: Monetary Policy press release; Monetary Policy press conference: Monetary Policy Report, April 2026
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