The Bank of Canada has announced that it will hold its interest rate steady at 2.25%, a decision made during its meeting on March 18, 2026. This marks the second time this year that the central bank has opted to maintain the rate, following a similar decision in January.
In its statement, the Bank of Canada highlighted the impact of ongoing geopolitical tensions, particularly the war in the Middle East, which has led to increased volatility in global energy prices and financial markets. The bank noted that these developments heighten risks to the global economy.
Currently, inflation remains within the Bank of Canada’s target range of 1-3%, providing some leeway for the central bank’s decision to hold rates steady. Maria Solovieva, an economist at TD Bank, remarked, “When inflation is close to the central bank’s target, there is no strong reason to change course.”
The Bank of Canada is closely monitoring the situation in the Middle East, particularly the implications of the conflict on the Canadian economy. The bank has indicated that the full impact of the Iran war will depend on the duration and severity of the conflict.
In addition, the bank pointed out that the ongoing situation has led to a significant portion of the world’s oil supply being at risk, with estimates suggesting that 20% of the global supply could be affected due to the closure of the Strait of Hormuz.
Interest rates set by commercial banks for loans, such as mortgages, are influenced by the Bank of Canada’s benchmark rate. The central bank has committed to ensuring that Canadians maintain confidence in price stability, even amid global upheaval.
Details remain unconfirmed regarding the potential for a rate hike later in the year, as this will depend on inflation pressures and broader economic conditions. The long-term effects of the Iran war on inflation and the Canadian economy are also not yet clear.
Bank of Canada Governor Tiff Macklem stated, “The fact that the Strait of Hormuz is essentially closed is cutting off a significant amount of global supply of energy.” This highlights the interconnectedness of global events and their potential impact on domestic economic policies.
As the situation develops, the Bank of Canada will continue to assess the impact of U.S. tariffs and trade policy uncertainty on the Canadian economy, ensuring that it remains responsive to changing economic conditions.
