The Bank of Canada has held its trend-setting Policy Rate at 2.25% for a fifth straight setting.

The decision was not unexpected but there have been some rumblings about interest rate movement based on the latest GDP numbers, which put the country into a “technical” recession. Many of those rumblings have been more political than economic.

Bank of Canada Governor Tiff Macklem says the current situation does not meet the bar for a recession.

“Based on the data we’ve seen to date, the economy is weak, but it is not clearly in recession,” Macklem said. “So far, we have not seen a significant, broad-based decline in economic activity.” “Recession is not the word I would use.”

Many independent economists agree that the forces which are holding back the Canadian economy – geopolitical uncertainty, trade tensions with the U.S. and the upcoming CUSMA review – cannot be readily mitigated using interest rate policy.

The central bank finds itself in something of a dilemma. Global geopolitical uncertainty, largely the war in Iran, has pushed up energy prices at an alarming rate. If those increases start to fuel broader inflation the Bank has said rate hikes would have to be used. If trade troubles with the U.S. lead to further slowing of the Canadian economy rate cuts may have to be deployed.

For the time being the Bank believes holding the Policy Rate is maintaining a balance between those conflicting forces. The question now is, how long can the Bank maintain that balance.

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As the 2026 federal census is being carried out across the country Statistics Canada has looked back through some past questionnaires and pulled out some enlightening information about Canada’s Millennials.

An intergenerational comparison shows 49.9% of millennials owned their home as of 2021, while 56.2% of Gen Xers did in 2006 and 55.9% of Baby Boomers in 1991. Millennial homeowners were less likely to live in a detached home than previous generations, and Millennials were nearly twice as likely to be living with their parents than Boomers were at the same age – 16.3% compared to 8.2% for the older generation.

For this study StatsCan went through three census cycles, dating back to 1991. The agency looked at Millennials aged 25 to 39 and compared them to Gen-Xers and Baby Boomers, when the previous generations fell into that same age group.

Declining housing affordability for younger Canadians has been a major political and social issue, and Millennials are seen as a key cohort in the important, first-time homebuyer market. An analysis by CBC suggests lower-end homes have increased by more than 200% since 2024, while young, dual-earner household incomes grew 76%.

Affordability is not the sole consideration. StatsCan notes that 39% of racialized millennials born in Canada were living with their parents, while only 14% of Canadian-born, non-racialized and non-Indigenous millennials did the same, suggesting that cultural differences could be a factor. Also, fewer millennials are parents than past generations. But among those who are married with kids, the rate of home ownership was “nearly identical” to baby boomers in 1991.

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April ended with a busy week of financial news. There were three significant announcements.

The first was the federal government’s Spring Economic Update, delivered on the 28th. It contained a key development in Ottawa’s efforts to get more homes built. Six billion dollars is being committed to get more people into the skilled trades needed in home construction. The funding is designed to bring as many as 100,000 new workers into the building trades by 2031.

Other housing-related announcements in the Update were largely modifications or expansions of existing programs to reduce costs, modernize regulations, and speed-up construction.

Announcements two and three are closely related.

The Bank of Canada held its trend-setting policy rate at 2.25% on April 29th. The hold was widely expected, but the Bank is focusing more on the uncertainty in the global economy as it gives guidance for the future. Generally, the Bank is pointing to the potential for rate hikes if the current spike in oil prices starts to take hold in the longer-term inflation outlook. Market watchers tend to see this as sign that lower rates are unlikely anytime soon.

Statistics Canada’s GDP announcement, which arrived on the 30th, is widely seen as supporting the forecasts for no further rate cuts. First quarter economic growth is tracking at 1.7%, despite trade drama with the U.S. and the American/Israeli war in Iran. That strength is seen as enough to keep the Bank of Canada on the sidelines.

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The decision-making process at the Bank of Canada has become a lot less mysterious since 2023, when the Governing Council started releasing its Summary of Deliberations. The latest summary offers some insights about how the process works.

The war in Iran was top of mind for the policy makers at the Bank, but they decided they “should not lose sight” of other major economic issues as they make their Policy Rate decisions.

The bankers’ key concern continues to be inflation, or more precisely expectations about inflation. The war has driven up fuel prices which are a very high-profile contributor to inflation.

“Higher gasoline prices, combined with still-elevated inflation in essentials such as groceries, could push up inflation expectations,” the summary said. “This was particularly relevant given that the experience with high inflation in 2022–23 remained fresh in people’s minds.”

When the wide-spread expectation is that prices will rise high and fast there are two things that can happen to hinder the economy: businesses can more readily increase prices and, as things get more expensive, fewer purchases get made. Therefore, there is “potential for weaker near-term growth and upside risks to inflation,” according to the Bank.

Still, the Bank says it will “take some time” to see how the conflict in Iran plays out. Headline inflation remains close to the Bank’s 2.0% target and core inflation pressures are seen as “limited.”

The Bank held its trend-setting, overnight rate at 2.25%.

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The federal government has announced a plan to put up $1.7 billion in an effort to get more homes built across the country.

The announcement on Thursday of last week (March 26) was a bit anti-climactic because the provincial government in Ontario revealed what it intended to do with its share of the money a day earlier.

On Thursday federal finance minister Francois-Philippe Champagne tabled legislation that would hand money to the provinces to use, in almost any way they see fit, to get more homes built.

“With respect to this particular program, we’re going to rely on our provincial and territorial partners to use that money in the most efficient way to increase the supply,” Champagne said.

The minister also said the money would be ready to deploy this spring, but that did not stop the Ontario government from stealing some of Ottawa’s thunder, the day before the announcement.

On Wednesday Premier Doug Ford revealed Ontario would be using its share of the funding to expand a harmonized sales tax (HST) rebate program.

The measure, which was included in the Ontario budget on Thursday, will offer a year-long HST rebate program to all buyers of qualifying homes.  Previously only first-time buyers were eligible under the federal GST/HST First-Time Home Buyers Rebate.

As of April 1, 2026, newly-built, homes in Ontario, valued at up to $1.5 million, would be eligible for a maximum of $130,000 in HST relief.

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World events and domestic economic reports are rekindling speculation about the Bank of Canada’s interest rate policy.

The BoC’s Policy Rate came to rest at 2.25% back in October and the central bank has been “hands off” since then.  That has been the expectation of most analysts going forward.  But there are some who are now saying there is a case to be made for a rate increase this year.  The broader markets have also been pricing-in a rate increase during the second half of this year.

They cite the potential for growing consumer uncertainty about rising inflation.  They suggest that worries about shaky trade relations with the U.S. are being exacerbated by the U.S.-Israel war against Iran.

Policy makers say inflation is largely under control and is heading toward the Bank’s 2.0% target.  But persistently high grocery costs and, now, rapidly rising gasoline prices could have an increasingly negative effect on consumer expectations.

“This is always a risk during oil supply shocks given consumers keep a close eye on prices at the pump.  But this is especially the case now with food inflation having also surged in recent months, given that the two make up roughly one-fifth of household spending between them,” Bradley Saunders, of Capital Economics wrote in a recent note.

Those who continue to call for no rate changes until 2027 say the economy may be too weak to tolerate higher interest rates.  They point to the latest Statistics Canada employment numbers.  The economy lost 84,000 jobs in February and the unemployment rate edged up to 6.7%.

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Things are looking a little better for Canada’s housing market this year, in the eyes of Canada Mortgage and Housing Corporation. The national housing agency has released its latest Housing Market Outlook and is projecting modest growth in sales and prices for 2026.

CMHC’s baseline forecast predicts home sales will rise to 489,000 units, up from 470,000 in 2025. The average price is also expected to rise, climbing to $698,000 compared to $680,000 last year.

Those numbers are in line with latest forecasts from the Canadian Real Estate Association. The country’s realtors expect 494,500 properties to change hands (+5.1%) with an average price of a little less than $690,000 (+2.8%).

Beyond the U.S. trade challenges and the economic uncertainty that have been dominating the headlines, Canada Mortgage and Housing points to several other factors that are likely to subdue the market including: lower population growth; weak income growth; higher mortgage costs; and a, generally, more cautious attitude among buyers.

Despite all the political hoopla about Canada’s housing shortage, CMHC is forecasting fewer housing starts for this year – 247,000 compared to 259,000 in 2025. The agency says developers are facing higher construction costs, weaker demand and rising inventories of unsold units.

Purpose built rentals are expected to lead new construction, with condominium apartments seeing the biggest declines.

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