Canada’s interest rate outlook may not be as stable as it seemed just days ago.
While the Bank of Canada held its benchmark rate at 2.25%, Governor Tiff Macklem is now warning that rate hikes could return if oil prices continue to surge.
Rates Held – But Risks Are Rising
The central bank has now held rates steady for the fourth consecutive decision, following a cut in October 2025.
But that pause may not last.
“If energy prices go higher, and particularly if they stay higher for longer, there could well be a need to increase the policy rate,” Macklem said.
He added that “consecutive increases” could be on the table if inflation pressures return.
What’s Driving the Concern
The main issue is oil.
- Brent crude is currently sitting around $109 USD per barrel
- The Bank of Canada’s forecast assumes oil drops to $75 USD by 2027
- That assumption is now at risk due to ongoing global conflict
A major factor is the disruption in the Strait of Hormuz, which handles roughly 20% of global oil supply.
Inflation Is Already Moving Higher
Canada’s inflation rate has started ticking up again:
- 2.4% in March, up from 1.8% in February
- Food prices rose 4.4% year-over-year
- Fresh vegetables surged 7.8%
Much of this increase is being driven by rising fuel costs, which are now feeding into transportation and grocery prices.
Why This Matters for the Housing Market
This shift in tone is important.
Markets had been expecting rate cuts later in 2026, but this signals the opposite risk:
- Borrowing costs could stay higher for longer
- Mortgage rates may not fall as quickly as expected
- Housing demand could remain subdued
At the same time, the Bank of Canada noted there is still limited evidence that oil-driven inflation has spread broadly – meaning policy decisions will depend heavily on what happens next.
What This Signals for Buyers
The path forward is becoming less certain.
If oil prices stabilize → rate cuts could still happen
If oil prices stay high → rate hikes could return
For buyers, that means:
- Expect continued volatility in mortgage rates
- Don’t rely on near-term rate cuts
- Plan based on current affordability, not future assumptions
References
Global News. (2026, April 29). Soaring oil prices might force ‘consecutive’ rate hikes, Macklem warns. https://globalnews.ca/news/11821934/bank-of-canada-interest-rate-april-2026/
Canada Housing Market 
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