The Bank of Canada announced on May 4 that it is maintaining the policy interest rate at 2.25 percent, according to an opening statement delivered by Governor Tiff Macklem before the House of Commons Standing Committee on Finance. Macklem was joined by Senior Deputy Governor Carolyn Rogers to discuss the central bank’s quarterly Monetary Policy Report and recent policy decisions.
The topic is significant as global events and energy prices continue to impact inflation and economic growth in Canada. The Bank of Canada strives to maintain price stability and foster economic growth by overseeing monetary policy and financial systems, according to the official website.
Macklem said there were three main messages: “First, Canada is being buffeted by global events and geopolitical uncertainties, but our economy is growing and is expected to continue to grow.” He added that higher global energy prices are pushing inflation up after a year near the two percent target: “The surge in gasoline prices combined with still-elevated food price inflation is squeezing more Canadians.” He also stated that monetary policy remains focused on ensuring temporary jumps in energy prices do not become persistent inflation.
Macklem outlined how international conflicts have led to higher energy costs, market volatility, and disrupted trade. Growth has resumed after a contraction at the end of last year, supported by consumer spending but challenged by U.S. tariffs. The labour market remains soft with unemployment between 6.5%–7%. The Bank projects Canada’s economy will expand 1.2% in 2026, rising gradually over subsequent years.
According to Macklem’s statement, consumer price index (CPI) inflation increased from 1.8% in February to 2.4% in March due mainly to rising gasoline prices: “So far, there is little evidence that higher oil prices have fed through to other goods and services prices more broadly.” However, he warned it was too early for firm conclusions.
Macklem confirmed that if oil prices remain high or if new U.S.-Canada trade restrictions are imposed, changes in monetary policy could follow: “If this starts to happen, there may be a need for consecutive increases in the policy rate.” Otherwise small adjustments are expected if current conditions persist.
Macklem has served as governor since June 3, 2020 according to the official website. The Bank manages currency operations including digital payments while regulating retail payment systems as outlined on its site. It also collaborates with university students through initiatives like the Governor’s Challenge for monetary policy simulations according to its official resources.
As Macklem concluded his remarks he said: “As the outlook evolves, we stand ready to respond as needed.” This highlights ongoing uncertainty around future decisions related both domestically and internationally.
