By Nushaiba Iqbal<\/p>\n
BENGALURU, June 5 – The Bank of Canada will hold its key overnight rate at 2.25% on June 10 and for the rest of the year, according \u200cto a majority of economists polled by Reuters, despite rising inflation risks stemming from a conflict-driven \u200crise in energy prices.<\/p>\n
While a persistent energy shock due to the U.S.-Israeli war with Iran pushed inflation to 2.8% in April \u200bfrom March’s 2.4%, it remained within the central bank’s 1-3% target range and a decline in core inflation suggests demand remains weak.<\/p>\n
That gives the BoC, which cut rates by 275 basis points between June 2024 and October 2025, room to stay put as economic activity lags.<\/p>\n
Robust job gains in May were welcome news \u200cfor Canada’s economy, which entered a \u2060technical recession in the last quarter for the first time since the COVID-19 pandemic.<\/p>\n
All 34 economists in the June 2-5 Reuters poll expected the BoC to leave \u2060the overnight rate unchanged next week. Over 80%, 28 of 34, predicted it would stay on hold throughout the year, similar to April poll estimates.<\/p>\n
Meanwhile, financial markets are pricing in one rate hike by end-2026.<\/p>\n
“We are not \u200bprojecting \u200bany hikes or cuts this year,” said Avery Shenfeld, \u200bmanaging director and chief economist at CIBC \u200cCapital Markets.<\/p>\n
“Core inflation will heat up in upcoming months on the spillover from oil prices, but not enough to justify a rate hike that would slow recovery in an economy far from full employment.\u201d<\/p>\n
Canada’s economy continues to struggle with trade-related uncertainties from the U.S., the country’s largest trading partner.<\/p>\n
The U.S.-Mexico-Canada free trade agreement, dubbed USMCA, which has shielded most of the country’s exports from U.S. tariffs, is up for \u200crenewal in July. Dominic LeBlanc, the minister responsible for Canada-U.S. \u200btrade, recently said Canada had a positive meeting with the \u200bU.S. about the review.<\/p>\n
Over 40% of poll \u200brespondents expected a rate hike in early 2027. However, views were split on \u200cthe timing.<\/p>\n
“A renewed oil price surge comes at \u200ba time when inflation expectations \u200bare more sensitive, raising the risk that shocks may carry larger and more persistent effects than in the pre-COVID period,” said Ren\u00e9 Lalonde, director, modelling and forecasting at Scotiabank.<\/p>\n
“If the Middle \u200bEast conflict drags on and \u200ccredibility slips further, inflation would become more persistent and rise more sharply, requiring materially tighter policy.”<\/p>\n
(Other \u200bstories from the Reuters global economic poll)<\/p>\n
(Reporting by Nushaiba Iqbal; Polling by Sarupya Ganguly and \u200bIndradip Ghosh; Editing by Hari Kishan and Nia Williams)<\/p>\n","protected":false},"excerpt":{"rendered":"By Nushaiba Iqbal BENGALURU, June 5 – The Bank of Canada will hold its key overnight rate at…\n","protected":false},"author":2,"featured_media":718026,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[52,45,49,48,221477,49308,46,50958,54814,64270],"class_list":["post-718025","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-bank-of-canada","tag-business","tag-ca","tag-canada","tag-canada39s-economy","tag-core-inflation","tag-economy","tag-poll","tag-rate-hike","tag-reuters-poll"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/718025","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=718025"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/718025\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/718026"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=718025"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=718025"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=718025"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}