The Bank of Canada held its key interest rate and is warning of higher inflation. Here’s what you need to know.

By Annie Bergeron-Oliver for CTV

Updated: April 29, 2026 at 11:36AM EDT

Published: April 29, 2026 at 5:54AM EDT

OTTAWA — The Bank of Canada is holding its key policy interest rate at 2.25 per cent for the fourth consecutive time as it warns of higher inflation for the short term.

In its first monetary policy report (MPR) since January, the central bank projects inflation will peak around three per cent in April, before declining to its two per cent target early next year.

That drop in inflation is based off an assumption that U.S. tariffs will remain at the current rate and that oil prices will drop from US$90 in the second quarter of 2026 to US$75 a barrel by mid-2027. That’s a 15-dollar-per-barrel increase since the bank’s previous MPR.

“After more than a year with inflation close to the two per cent target, higher global energy prices are pushing inflation up,” Bank of Canada Governor Tiff Macklem said in his opening remarks. “The surge in gasoline prices combined with still-elevated food price inflation is squeezing more Canadians.”

A deeper dive into the various components of the consumer price index (CPI), which measures inflation, shows that rent and food prices remain higher than average, while other components have dropped back to their historical norms.

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