The Bank of Canada once again held its benchmark interest rate steady on Wednesday, keeping the overnight rate at 2.25% as policymakers continued their pause after a prolonged easing cycle last year.
The central bank said global energy markets have become more volatile since the outbreak of the Middle East conflict, pushing oil and gas prices higher and tightening financial conditions. At the same time, Canada’s economy showed renewed weakness late last year and into early 2026, with GDP contracting in the fourth quarter, the labour market softening and exports remaining under pressure amid ongoing trade uncertainty with the United States.
Bank of Canada Governor Tiff Macklem and the bank’s governing council have now left rates unchanged for three consecutive decisions, holding the overnight rate steady since October 2025, following a series of rate cuts made through 2024 and 2025.
The policy rate stood at 4.25% in September 2024 before the bank began lowering borrowing costs, cutting rates again in October 2024, December 2024, January 2025 and March 2025. Additional reductions later in 2025 brought the overnight rate to its current level of 2.25% last October.
Real estate professionals said the decision to keep rates at current levels could benefit certain sectors, while some said the geopolitical and resulting economic uncertainty could raise the possibility of the central bank increasing interest costs later this year.
Mark Fieder, president of Avison Young, said the central bank’s decision to hold rates was expected, but warned that the policy path later in 2026 remains uncertain.
“With current socioeconomic instability, there is a recent question around whether the BoC could, in fact, hike interest rates at some point later in 2026," Fieder said in a statement. “With current levels of uncertainty around inflation, we will watch to see how economic indicators influence the Bank’s decisions this year, as any moves on the interest rate will have important implications for business and real estate investment,” he said.
The decision to hold rates steady might offer some near‑term relief for the industrial real estate sector, said Nicholas Stryland, chief operating officer and partner at Spear Realty, as investors and owners deal with upcoming loan maturities.
“It could help diminish the gap between buyer and seller expectations,” Stryland said. “It buys more time for investors and owners who have mortgages (coming) due, especially in land, because there’s been a lot of land plays where there’s no income. From a carrying‑cost perspective, it will be better.”
Oil prices increase inflation risk
The pause comes as inflation continues to cool on paper. Canada’s annual inflation rate slowed to 1.8% in February, down from 2.3% in January, according to Statistics Canada, placing headline inflation below the Bank of Canada’s 2% target midpoint.
“With recent data pointing to weaker economic activity and uncertainty elevated, risks to growth look tilted to the downside," the central bank said. "At the same time, inflation risks have gone up due to higher energy prices."
Statistics Canada said the February slowdown in price increases was largely technical, driven by the end of last year’s temporary tax holiday that removed the 5% goods and services tax, or GST, or any applicable harmonized sales tax or HST, on a range of consumer goods aimed at helping reduce holiday expenses.
The data does not yet reflect the recent rise in gasoline and oil prices tied to the Middle East conflict that economists warn could push inflation higher in the months ahead. Food and housing costs continued to rise year over year.
The Bank of Canada’s preferred core measures of inflation also eased in February. CPI‑trim, a consumer price index that excludes components with extreme price changes, and CPI‑median both slowed to 2.3%, while CPI‑common, which tracks shared price changes across several CPI components, fell to 2.4%. As a result, all three CPI measures moved closer to the bank’s goal of keeping inflation at the 2% midpoint of its inflation-control target range of 1% to 3%.
Still, the economic outlook remains clouded by global energy markets, said Keith Reading, senior director of research at Morguard, particularly if higher oil prices persist.
“The cost of oil is the cost of doing business, particularly for anybody in the shipping industry,” Reading told CoStar News in an interview. “It’s a cost incurred not just to deliver goods to the consumer, but to move goods around the supply chain, so that will have an impact on the cost base of businesses and consumers.”
Reading said sustained increases in oil prices would likely weigh on consumer spending and ripple through commercial real estate, especially industrial and retail, as higher transportation and input costs, or expenses incurred by businesses for energy, raw materials, labor and other resources.
Amid a slew of residential mortgages coming due this year, the Bank of Canada hiking its overnight lending rate in the next few months would further soften consumer spending, he said.
Phil Soper, president and CEO of Royal LePage, said the Bank of Canada’s decision offers some welcome steadiness at a time of global uncertainty.
“Despite growing geopolitical uncertainty, interest rates remain steady following today’s Bank of Canada announcement," he said in an email. "As global markets react to developments in the Middle East, policymakers will be watching closely for any impact on inflation and, ultimately, borrowing costs. For Canadians preparing to purchase a home or renew their mortgage this spring, the key takeaway is stability.
"Today’s decision provides households with a measure of certainty as they plan major financial commitments in the weeks ahead.”
The Bank of Canada has said it is assessing how much restraint is still needed as inflation eases and economic growth remains uneven. Its next interest rate decision is scheduled for April 29.