Bank of Canada to Track Longer-Term Inflation Expectations for Rate Guidance

Central bank governor says officials will closely monitor medium- and longer-term CPI forecasts when deciding on interest rate hikes.

Apr. 17, 2026 at 6:44pm

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A geometric abstract illustration in the style of Herbert Bayer, using simple shapes and primary colors to conceptually represent the influence of medium- and longer-term inflation expectations on central bank monetary policy.The Bank of Canada's focus on anchoring inflation expectations will be a key factor in its upcoming rate decisions.Washington Today

Bank of Canada Governor Tiff Macklem said the central bank will closely track medium- and longer-term inflation expectations when determining whether interest rate hikes are necessary, as it seeks to balance the risk of raising rates too early and stunting economic growth versus letting inflation become entrenched. Macklem expects March inflation data, set to be released on Monday, will show an acceleration but likely below 3%.

Why it matters

The Bank of Canada's ability to anchor inflation expectations around its 2% target is crucial for maintaining price stability and guiding monetary policy decisions. If businesses and households lose confidence that inflation will return to the target range, it could force the central bank to take more aggressive action on interest rates.

The details

Macklem said the central bank will pay close attention to the Bank of Canada's quarterly survey of business and household sentiment, which will provide the first clue about inflation expectations. Businesses' inflation expectations influence wage negotiations, price setting, and investment decisions, while households' views on future prices impact spending and savings. Well-anchored inflation expectations help the Bank of Canada achieve its 2% inflation target.

  • The March inflation data will be released on Monday, April 17, 2026.
  • The Bank of Canada's quarterly survey of business and household sentiment will be issued shortly after the inflation report on April 17, 2026.

The players

Tiff Macklem

Governor of the Bank of Canada, who oversees the central bank's monetary policy decisions.

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What they’re saying

“We don't want to jump too early and raise interest rates and lower growth, particularly when growth is already weak. On the other hand, you don't want to be late and let inflation get a hold and become entrenched.”

— Tiff Macklem, Governor, Bank of Canada

What’s next

The Bank of Canada will closely monitor the results of its quarterly survey on business and household inflation expectations, which will be released shortly after the March inflation data on April 17, 2026. This will help guide the central bank's decision-making on future interest rate hikes.

The takeaway

The Bank of Canada is walking a fine line between raising rates too soon to curb inflation and waiting too long, which could allow price pressures to become entrenched. Closely tracking medium- and longer-term inflation expectations will be crucial for the central bank as it seeks to achieve its 2% target without stifling economic growth.