BoC Press Conference: Interest rate announcement & release of the Monetary Policy Report

*WARSH FED NOMINATION HAS ENOUGH COMMITTEE VOTES TO ADVANCE Senate Banking Committee Approves Fed Chair Nominee Warsh, Advances To Full Senate Vote Kevin Warsh's Fed nomination clears the Senate Banking Committee, as expected, on a 13-11 party-line vote. He receives no Democratic support. Sen. Warnock says he is disappointed at Warsh's answers to written questions. "Did he take this process seriously?" This is the first ever party-line vote for a Fed chair out of committee. Until 2020, party-line votes for any Fed nominees were unusual. The previous two Fed chair votes (both Powell) were approved on votes of 22-1 and 23-1.

Good morning. I’m pleased to be here with Senior Deputy Governor Carolyn Rogers to discuss our quarterly Monetary Policy Report and today’s decision. The Governing Council maintained the policy interest rate at 2.25%. We’ve held the policy rate at this level since October. We have three key messages. First, Canada is being buffeted by global events and geopolitical uncertainties, but our economy is growing and is expected to continue to grow. Second, after more than a year with inflation close to the 2% target, higher global energy prices are pushing inflation up. The surge in gasoline prices combined with still-elevated food price inflation is squeezing more Canadians. Third, monetary policy is focused on ensuring the jump in energy prices does not turn into persistent inflation, while helping the economy adjust to global headwinds. We are committed to keeping inflation low and stable over time. Let me expand on the economic outlook, the risks and the implications for BOC: MAY HIKE IF OIL PRICES STAY HIGH, CAUSE ONGOING INFLATION #OOTT BoC's Gov. Macklem: There may still be a need to adjust the policy rate depending on how risks evolve. BoC's Gov. Macklem: If higher energy prices start leading to ongoing generalized inflation, we may need consecutive rises in policy rate. BoC's Gov. Macklem: If the US imposes… BOC'S GOV. MACKLEM: MONETARY POLICY WILL DEPEND IMPORTANTLY ON USMCA TRADE TALKS, MIDDLE EAST WAR, AND IMPACTS OF US TARIFFS AND ENERGY PRICES. ... BOC'S GOV. MACKLEM: UNCERTAINTY IS UNUSUALLY ELEVATED; MONETARY POLICY MAY NEED TO BE NIMBLE. ...

Before the outbreak of the war in the Middle East, the Canadian economy was evolving as expected. Since the war began, oil prices have risen, pushing inflation up, and the outlook has become more uncertain. Economic growth in Canada has been broadly consistent with the outlook in the January Report. Consumer and government spending are supporting gross domestic product (GDP), while US tariffs and related trade uncertainty are weighing on exports and investment. Inflation had been slowing as expected before the oil price shock occurred. The war in the Middle East is already affecting the economy. The immediate impact has been higher gasoline prices, pushing up consumer price index inflation to 2.4% in March. The outlook is highly conditional on key assumptions, including that tariffs remain unchanged and that oil prices gradually decline from US$90 in the second quarter of 2026 to US$75 per barrel by mid‑2027 (see the Tariff and other assumptions section). BOC: NOMINAL NEUTRAL INTEREST RATE IS ESTIMATED TO BE IN THE RANGE OF 2.25% TO 3.25%, UNCHANGED FROM JANUARY. BOC'S GOV. MACKLEM: IMPACT OF THE MIDDLE EAST WAR ON OVERALL CANADIAN GROWTH IS EXPECTED TO BE SMALL. BC: MOST MEASURES OF ANNUAL WAGE GROWTH ARE BETWEEN 3% AND 3.5%. ...

BoC's Gov. Macklem: If energy prices stay higher for longer, there could well be a need to raise the policy rate. BoC's Gov. Macklem: AI is not having a big effect on our policy decisions right now. BoC’s Macklem: No Set Timeline For Possibly Raising Rates BoC's Gov. Macklem: There is no risk-free path for the policy interest rate. BoC's Gov. Macklem: If we'd raised the rate now and oil prices had then gone down, by the time the rate was impacting the economy, we would wish we hadn't raised the rate.

BoC's Senior Dep. Gov. Rogers: Over the longer term, trade tensions are a bigger threat to the economy than higher oil prices.

BoC's Gov. Macklem: Wouldn't characterise today's comments as forward guidance. BoC's Gov. Macklem: It is useful to convey how we would handle various potential outcomes.