BoC holds interest rate, but warns of downstream effects of Iran war

ByAnnie Bergeron-Oliver for CTV News

Updated: March 18, 2026 at 11:44AM EDT

OTTAWA — The Bank of Canada held its principal interest rate at 2.25 per cent Wednesday, but warned rising oil and natural prices caused by the war in Iran will push up inflation in the short term.

In its latest monetary policy decision, Canada’s top bankers painted a picture of a weaker-than-expected economy that is facing new levels of uncertainty because of the war.

“Canada’s economy is dealing with a lot. And now, we face more volatility,” Bank of Canada Governor Tiff Macklem said in his opening remarks at Wednesday’s rate announcement.

Data released by Statistics Canada this week shows inflation dropped to 1.8 per cent in February from 2.3 per cent in January. Both reports represent data largely collected before the U.S.-Israeli strikes. The March CPI data, Macklem said, will be higher.

But how big the war’s impact will be, the bank says, depends on how high oil prices go and how long the conflict lasts.

“Inflation in Canada has been close to the two per cent target for more than a year,” Macklem said. “But, as we’ve seen, the war in Iran is causing oil prices to move sharply higher and this will push up inflation in the short term.”

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