Energy sector investment, exchange rate factors in possible Bank of Canada rate hikes

Bank of Canada Governor Tiff Macklem waits to appear at the finance committee in Ottawa. THE CANADIAN PRESS/Adrian Wyld

OTTAWA — The Bank of Canada’s governing council says it’s weighing a range of different paths for its benchmark interest rate to cope with inflation risks from the Iran war.

The central bank today released the summary of deliberations that led to its decision to hold the policy rate steady for a fourth consecutive time in late April.

At the time, Bank of Canada governor Tiff Macklem was candid about the dilemma the Middle East conflict poses for monetary policy-makers.

He said the policy rate might have to go lower if inflation is well-contained but the economy suffers, while spreading cost pressures from the higher global price of oil could push the Bank of Canada toward consecutive rate hikes.

In the summary of deliberations, the governing council said the degree of tightening required in that scenario would partly depend on the level of investment in the energy sector as well as what happens to the Canadian dollar’s exchange rate with its U.S. counterpart.

Future changes in monetary policy are expected to be small if the economy evolves roughly in line with the Bank of Canada’s latest forecast, but the summary of deliberations shows there’s a range of views among central bank officials about the most likely path forward for the benchmark rate in this period of heightened uncertainty.

This report by The Canadian Press was first published May 13, 2026.

Craig Lord, The Canadian Press