The Bank of Canada (BoC) and US Federal Reserve Board (Fed) held their respective policy interest rates steady as they assessed mounting uncertainty. Fed Chair Jerome Powell noted in the news conference following the Fed’s decision that the current energy shock is likely to put short-term upward pressure on inflation, but longer-term consequences are more unclear. Powell’s term is due to end on May 15, 2026; however, he does not plan to leave the Fed until the US Department of Justice Criminal Division investigation of him is over.

• BoC holds policy interest rate at 2.25%. The decision matched market expectations and was accompanied by caution from the BoC that global economic risks could lead to rate adjustments up or down.
• Fed benchmark rate stays between 3.50% and 3.75%. Eleven of 12 members of the Federal Open Market Committee voted to hold the range of the federal funds rate steady. The lone dissenter voted to cut the rate.
• The Fed maintained guidance for one rate cut in 2026 and one more in 2027. The US economic growth outlook for 2026 was lifted to 2.4%. The previous forecast was 2.3% in December.
• Inflation outlook changes. Fed officials raised their core inflation expectations for the end of 2026 to 2.7% from 2.5% previously.      
• More central bank decisions today. The announcements from central banks are far from over. Today, look for decisions from the Bank of Japan (BoJ), the European Central Bank and the Bank of England. Economists expect more decisions to hold. Since Japan imports much of its energy, the recent oil price increases could push up inflation and weigh on the BoJ’s deliberations.

The next BoC decision will be on April 29, while the next Fed decision is on May 7. The Fed cut interest rate three times in 2025 and has since held steady. Policymakers may face a dilemma if economic growth in North America slows while inflationary risk increases. According to Powell, inflationary pressure in the US is not coming from the jobs market, and it is difficult to anticipate the total economic effect of higher energy prices on inflation. He said that it’s too early to assess the overall disruption from the war on Iran.

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