The Bank of Canada has now held its policy rate at 2.25% for four consecutive decisions. That consistency is not stubbornness. It is the product of a deliberate analytical framework: Governing Council decided in April to look through the immediate inflationary impact of higher energy prices on the grounds that a supply shock does not warrant a policy tightening response unless it feeds into persistent broad-based price increases. The question in front of advisors today is whether that framework survives the May 19 CPI release.
The March CPI number set the table. Inflation rose from 1.8% in February to 2.4% in March, driven primarily by gasoline. Statistics Canada described the gasoline component as the largest monthly increase on record, a direct consequence of the Hormuz disruption. Core inflation measures, which the Bank uses as its operational guide, told a more contained story: CPI-trim, CPI-median, and CPI-common all held steady just above 2% in March. The BoC took those core readings as evidence that the energy shock had not yet fed into broader goods and services prices. "So far, there is little evidence that higher oil prices have fed through to other goods and services prices more broadly," Macklem said on April 29. "But it is early days."
What April CPI Will Tell the Bank
The April CPI release, scheduled for May 19, will be the first test of that "early days" framework. The Bank's own projection has total CPI peaking near 3% in April. If April CPI comes in at 3% or above, it will confirm the Bank's forecast and maintain the hold scenario. If it comes in materially above 3%, particularly if core measures show any upward movement, the calculus for June 10 shifts meaningfully.
The Bank's April baseline forecast assumes Brent crude will gradually decline from US$90 per barrel in Q2 to US$75 by mid-2027. With Brent currently above $94 and the ceasefire under strain, that assumption is already failing its first real test. National Bank of Canada economists expect the policy rate to remain at 2.25% through 2026 and then rise to 2.50% in Q1 2027. But that forecast was built before the ceasefire fragility became apparent this week.
The chart above shows Canadian CPI headline and core measures over the past fourteen months alongside the Bank of Canada policy rate, illustrating the divergence that has opened between energy-driven headline inflation and the core measures that drive actual BoC decisions.
The July 2025 CPI spike to 2.5% reflected temporary factors; the March 2026 acceleration to 2.4% is energy-driven and expected to continue into April. Core inflation (dashed line) has remained anchored just above 2% throughout, which is why the Bank has maintained its hold posture. A core breakout above 2.5% in April or May would change the policy calculus significantly. Source: Statistics Canada, Bank of Canada.
What the June 10 Decision Hinges On
Three variables now determine the June 10 outcome. First, the April CPI print on May 19: total and core. Second, the trajectory of oil between now and June 10. Third, evidence of second-round effects: whether higher energy prices are feeding into wages, services prices, and inflation expectations in a way that core measures have not yet captured.
National Bank's economists currently project the policy rate to remain at 2.25% through 2026. But that forecast was articulated before the ceasefire rhetoric deteriorated this week. The True North Mortgage CEO described the BoC as "counting the cards and holding," a fair characterisation of a central bank that is genuinely uncertain between two competing risks: a potential rate hike if oil-driven inflation entrenches, and a potential cut if US tariff pressure overwhelms domestic demand. For Canadian advisors, the honest framing for clients is that the Bank of Canada's next move is now genuinely uncertain in a way it was not three weeks ago.