Bank of Canada widely expected to hold for a sixth straight time
Earlier in 2026, the BoC flagged a two-sided risk profile: the possibility of rate cuts if growth disappointed more sharply than forecast, and potential hikes if energy prices from the Iran conflict drove a sustained, generalized consumer price shock. In recent weeks, neither scenario has materialized.
Inflation concerns retreat
Higher oil prices stemming from restricted traffic through the Strait of Hormuz have weighed on household budgets, but the shock has not spread broadly across the consumer spending basket.
The BoC’s Business Outlook Survey, conducted when crude was near recent peaks in May 2026, showed businesses’ longer-run inflation expectations still well-anchored.
Core inflation measures have since moved down to around 2%, consistent with the Bank’s target, and crude prices have pulled back somewhat, further reducing pressure on the BoC to act.
Canada’s annual inflation rate climbed to 3.2% in May 2026, its highest reading since December 2023, but the acceleration was driven predominantly by gasoline, not by broad-based domestic pressures.
