Bank of Canada Holds Interest Rates Steady as Inflation Creeps Higher

The Bank of Canada has elected to keep interest rates at current levels amid signs that inflation is moving higher across the country.

Canada’s central bank announced on April 29 that it is is holding its trendsetting interest rate at 2.25%, the fourth consecutive time it has left interest rates unchanged. The move was widely expected with financial markets placing the odds of another rate hold at 93%.

In addition to standing pat on interest rates, the Bank of Canada revised its inflation outlook saying that it now projects that inflation will peak at 3% in April of this year before declining to the central bank’s 2% annualized target in early 2027.

The Impact of Higher Oil Prices

The central bank’s latest inflation forecast is based on assumptions that U.S. tariffs will remain at their current rate and that oil prices will fall from an average of $90 in the second quarter of this year to $75 a barrel by mid-2027. Like many countries, Canada is struggling as crude oil prices currently top $100 per barrel, sparking a rise in consumer prices.

“After more than a year with inflation close to the two per cent target, higher global energy prices are pushing inflation up,” said Bank of Canada Governor Tiff Macklem at a news conference held in Ottawa. “The surge in gasoline prices combined with still-elevated food price inflation is squeezing more Canadians.”

Canada’s benchmark Toronto Stock Exchange is down about 1% following the latest interest rate decision, as are leading Canadian stocks such as Shopify (SHOP) and Lululemon Athletica (LULU).

Is LULU Stock a Buy?

Lululemon Athletica’s stock has a consensus Hold rating among 20 Wall Street analysts. That rating is based on one Buy and 19 Hold recommendations issued in the last three months. The average LULU price target of $178.38 implies 23% upside from current levels.