The Bank of Canada is expected to hold firm on its 2.25% benchmark interest rate when it announces its policy decision on Wednesday.

The widely anticipated hold would mark the sixth straight time that the central bank has held its key overnight lending rate.

A recent C.D. Howe Institute poll showed that all nine economists surveyed were unanimously in favour of the BoC holding the prime rate at 2.25%. The institute’s monetary policy council (MPC), which acts as a shadow BoC governing council, called for the Bank to hold the overnight rate target at its current level into 2027.

MPC members noted that the Bank’s core inflation measures are at or near its 2% target, and inflationary pressures have not expanded beyond the industries directly affected by the war in the Middle East.

In an interview with The Toronto Star, TD Economist Maria Solovieva agreed that the BoC will hold the overnight rate. 

“If you think of the [economic] outlook since June’s meeting, not a lot of things have changed since then,” she told her interviewer. “So, neither a cut nor a hike look very urgent.”

Looking through month-to-month volatility, the broader economic picture remains encouraging, with employment up year-over-year. she said in a research note provided to this writer. Canada’s trade surplus, driven largely by exports to the U.S., provided further evidence that the economy is moving in the right direction, Solovieva added.

“With little evidence that higher oil prices are spilling over to broader inflation, we expect the Bank of Canada to keep rates unchanged at 2.25% at [Wednesday’s] policy meeting,” she said.

While the Canadian annual inflation rate jumped above the central bank’s target range in May, the BoC’s preferred “core” measures of inflation — which strip out volatility — have been steady, supporting the case for another rate hold, the Star noted.

“Pass-through from oil prices to other consumer prices has been extremely limited,” Royce Mendes, head of macro strategy at Desjardins, wrote in a client note, the Star reported.

BoC Governor Tiff Macklem has warned that economic shocks could prompt the Bank to adjust interest rates, and decisions may be made outside of conventional policy. But there is little indication that the BoC will veer from its current holding policy.

Pictured: Bank of Canada Governor Tiff Macklem

Photo: University of Toronto