Bank of Canada Deliberations Reveal a Central Bank Caught Between Fire and Ice

At 1:30 PM ET today, the Bank of Canada releases the summary of deliberations from its March 18 rate decision. What makes this document unusually significant is context: Governing Council was navigating two forces that point monetary policy in opposite directions simultaneously. A labour market shedding 84,000 jobs in a single month argues for cuts. An oil price shock that has pushed gasoline above $1.90/litre and is feeding into transportation, food, and industrial costs argues for caution or even tightening. The deliberations will reveal, in unscripted detail, which force the Council considers more durable.

Governor Tiff Macklem’s post-decision press conference on March 18 gave a preview. He said the Bank would “look through” the immediate inflation spike from gasoline prices, but added, “if energy prices stay high, and we start to see evidence that it’s generalizing and becoming more persistent, we can raise the policy interest rate.” That conditional language has rarely been used in the current cycle. The deliberations document will show whether that language reflected a genuine internal debate about hiking, or was precautionary framing designed to preserve optionality without any serious discussion of tightening.

The Stagflation Dilemma in Numbers

Canada’s economic position heading into April is genuinely difficult. CPI inflation stood at 1.8% in February, well within the Bank’s 1-3% target band, but that reading predates the worst of the gasoline price surge. The Bank of Canada’s own statement on March 18 flagged that gasoline prices would “push up total inflation in the coming months.” The Canadian Fuels Association has confirmed that many jurisdictions are now above $1.90/litre, with Vancouver exceeding $2.00/litre. Each 10-cent increase in pump prices adds roughly 0.2 percentage points to headline CPI. If current levels persist, March CPI could print above 3%, breaching the upper band of the target for the first time since 2023.

Against that inflationary pressure sits a labour market that is deteriorating rapidly. February’s loss of 84,000 jobs, driven by a 108,000 decline in full-time employment, was among the worst monthly readings outside the pandemic. Unemployment rose to 6.7% from 6.5% in January. TD Economics described the report as “decidedly weak,” noting both employment declined and the labour force contracted for a second consecutive month. The Q4 2025 GDP contraction of approximately 0.6% quarter over quarter annualized adds to the picture of an economy losing momentum before the oil shock even arrived.

What the April 29 Decision Looks Like From Here

The next scheduled rate announcement is April 29, and it arrives with an accompanying Monetary Policy Report, the Bank’s most comprehensive quarterly forecast. That document will need to grapple explicitly with the inflation and growth scenarios created by the Iran war. If the Strait of Hormuz remains closed through late April, the Bank faces a scenario in which headline CPI may be running above 3% while the unemployment rate is climbing toward 7%. That is a genuine stagflation configuration, not merely a theoretical risk.

Bond markets are currently pricing a 14% probability of a 25-basis-point hike at April 29, according to data from nesto.ca. That probability will move in response to how the ceasefire signals develop over the next four weeks, where March CPI lands when Statistics Canada reports in mid-April, and whether the deliberations published today suggest the Governing Council came closer to hiking in March than the public statement implied. Major bank forecasters, including TD, CIBC, and RBC, are clustered around the view that the BoC holds at 2.25% through 2026. Scotiabank is the outlier, projecting a rise to 2.75% by year-end. BMO chief economist Douglas Porter has explicitly argued against hiking in the current environment: “I do not see the Bank of Canada hiking” while the economy is losing jobs and consumers face higher fuel costs simultaneously.

The Canadian Household in the Middle

The energy shock is hitting Canadian households through multiple channels simultaneously. University of Calgary economist Trevor Tombe estimates the current oil price shock adds approximately $500 annually to the average household’s fuel costs, scaling to roughly $3,600 at the extreme scenario of $200/barrel WTI. Transportation costs, food prices, and manufacturing inputs are all rising. At the same time, 84,000 fewer Canadians have jobs than did a month ago. For the Bank of Canada, the policy question is whether to prioritize the inflation signal, which argues for holding or hiking, or the growth signal, which argues for easing. The deliberations published today will provide the most transparent view yet of how the Council is weighing that choice.