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Bank of Canada Continues to Be "Very Patient" as Assesses How Risks Play Out, Says CIBC

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The Bank of Canada held interest rates steady again on Wednesday, as policymakers take time to assess the dueling risks to growth and inflation from elevated oil prices on the one hand and trade uncertainty on the other, said CIBC.

In keeping its overnight rate steady at 2.25%, the BoC continues to state that it would "look through" the near-term spike in inflation driven by global oil prices, but also that it would guard against that turning into "persistent inflation," noted the bank.

Canada's central bank pointed out to only "limited evidence" of pass-through so far, and that core measures of inflation had moved down to around 2%. While the statement made note of the latest strong employment report, it correctly stated that through the volatility, employment was little changed since the start of the year and that the unemployment rate has been largely range bound between 6.5% and 7%.

The opening remarks for the press conference once again stated that there are scenarios that could warrant both lower interest rates (new tariffs) as well as rate hikes (oil price pass-through to generalized inflation). But by retaining the word "consecutive" for hikes in a possible high oil price and generalized inflation scenario, the BoC continued to play into market expectations that the magnitude of risks isn't symmetric, stated CIBC.

CIBC continues to see no change in interest rates this year, and that rates at their current level should support a recovery in the economy later this year and into 2027, assuming some of the uncertainties regarding oil prices and trade lessen during that time period.

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