Minutes from the Bank of Canada’s latest policy meeting show the Governing Council weighed holding its benchmark rate at 2.25 percent against raising it to 2.50 percent. Members agreed there could be a need for a further increase down the road.
The minutes stressed that any move would be judged one meeting at a time. Policymakers noted that uncertainty did not mean inaction, a signal that the door remains open to tightening despite the pause.
Inflation risk seen rising
The council judged that the risk of high inflation persisting, and becoming broad-based, has increased since its last assessment. It noted that a higher-for-longer oil price scenario sketched out in the April Monetary Policy Report has now materialised.
Officials said the energy shock alone would keep headline inflation near 3 percent for more than a year, even without any additional pass-through of costs into consumer prices. They expect inflation to run around 3 percent, reaching 3.5 percent by the end of 2026 and staying above 3 percent through much of 2027 before easing back to the 2 percent target by mid-2028.
Cost pass-through to consumers has so far been limited, the council said, though it is expected to show up eventually. Members voiced differing views on how quickly and how far that pass-through would go. Near-term inflation expectations have moved higher, but longer-term expectations remain anchored.
Growth and labour market
Core inflation measures are running at roughly 2 percent, while CPI excluding gasoline stands at 2.2 percent. The unemployment rate is around 6.5 percent.
The bank revised its 2026 growth forecast up to 1 percent, with growth seen at 2 percent in both 2027 and 2028. Some slack remains in the economy. Several members argued the labour market may be stronger than the headline jobless figure suggests.
Related: BoJ minutes show members split on pace of rate hikes
Source: Bank of Canada
