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Bank of Canada Holds Policy Rate at 2.25%, but Uncertainty Grows

As widely anticipated, on March 18th, the Bank of Canada maintained its overnight rate at 2.25%, the third consecutive hold since the last cut in October 2025. Prime rate remains at 4.45%.

What’s Next? 

With the Canadian economy already facing heightened uncertainty related to US trade, the war in the Middle East has added a new layer of uncertainty. The Bank is navigating a difficult balancing act. As Macklem put it: “Economic weakness combined with rising inflation is a dilemma for central banks. Raising interest rates to slow inflation could further weaken the economy. Easing interest rates to support growth risks pushing inflation well above target.”

Translation? Don’t expect the Bank to rush in either direction. They intend to look through the short-term energy price spike, but made clear they won’t allow it to feed into broader, persistent inflation. The next decision is April 29, 2026, which will include a full Monetary Policy Report update.

What This Means for Mortgages: 

With rates on hold, variable-rate holders won’t see immediate payment changes. Fixed rates remain tied to the bond market, and rising geopolitical uncertainty has resulted in significant volatility and pushed bond yields higher. Given the unusual push-and-pull between weak growth and rising inflation risk, now is a particularly important time to review your mortgage strategy or look at securing a rate hold.  If rates go up, you are protected; if rates come down, you can still benefit from the lower rate.

Key Economic Takeaways:

  • GDP contracted 0.6% in Q4 2025, weaker than the Bank’s January forecast
  • CPI inflation fell to 1.8% in February, down from 2.3% in January and core inflation measures are close to 2%
  • Unemployment rose to 6.7% in February, with Q4 2025 job gains being largely reversed in early 2026
  • Rising energy prices expected to push total inflation higher in the coming months
  • The CUSMA review remains a significant unknown for the outlook
  • While forecasts change regularly, at present, most economists are forecasting the Bank of Canada to remain on hold before moving rates upward in early 2027.

Bank of Canada Links:

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