Analysts saw a dovish tilt behind the hold as war and energy risks loomed
The Bank of Canada’s latest rate hold at 2.25% landed exactly where markets bet it would – but economists said the message behind it points to a central bank bracing for weaker growth and war‑driven uncertainty rather than gearing up for another tightening cycle.
In its March 18 decision, the Bank kept the policy rate unchanged and underlined that “risks to economic growth are tilted to the downside” even as energy prices surged following the war in Iran.
Governing Council said it would look through the war’s immediate impact on inflation but warned that if energy prices stay high “we will not let their effects broaden and become persistent inflation.”
Economists see a long hold, not fresh hikes
Andrew Hencic, director and senior economist at TD Economics, said the decision fits a pattern that emerged since January: a data‑dependent Bank trying to stop an energy shock from spilling into core prices while acknowledging that the domestic backdrop softened.
The economy has grown “at a slower pace” than the Bank has forecasted, leaving “excess supply” that, in its view, helped contain the risk of broad‑based price pressures.
Given that mix, Hencic said he expects the Bank to “stay on the sidelines, for now,” with any future move hinging on whether core inflation and expectations drifted higher in response to the conflict.
Douglas Porter, chief economist and managing director at BMO Economics, called the announcement a case of “preaching patience.”
The Bank, he said, faced “a dilemma for central banks,” with growth downgraded, underlying inflation hovering near the 2% target, and financial conditions already tighter on the back of higher bond yields and wider credit spreads.
In that context, he said, “the case for rate hikes is weak,” especially with trade and geopolitical risks compounding the shock from oil.
Real estate and mortgage markets focus on stability
Real estate leaders also read the decision as a cautious hold in an unstable environment.
“We fully expected the Bank of Canada would hold the overnight rate today, yet again,” Mark Fieder, president of Avison Young Canada, said.
“With current socioeconomic instability, there is recent question around whether the BoC could in fact hike interest rates at some point later in 2026. This would not be surprising although, naturally, I would rather see interest rates lower, to stimulate investment opportunities – particularly in higher‑performing sectors like multifamily, industrial, and retail.”
He added that “any moves on the interest rate will have important implications for business and real estate investment.”
Fieder’s emphasis on “higher‑performing sectors like multifamily, industrial, and retail” echoes broader commercial real estate commentary that viewes stable borrowing costs as a prerequisite for any sustained recovery in deal activity, even if cap‑rate compression remains elusive in the near term.
What comes next
Most economists still expect the Bank to sit tight at its next decision, absent a material re‑acceleration in core inflation.
Hencic’s longer‑term forecasts have the policy rate anchored near an estimated neutral level of 2.25% as growth returns to trend, suggesting that 2026 could be a year of watching rather than acting for monetary policymakers.
Porter, for his part, points to the upcoming review of the Canada–United States–Mexico Agreement as another brake on any appetite to hike.
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