Inflation is holding steady at 2% — but the Bank of Canada says more volatility is coming. Here's what to do

While the BoC held its benchmark interest rate steady at 2.25% for a third consecutive time in March 2026, Rogers made it clear: Stability today does not mean stability tomorrow.

For Canadians managing mortgages, variable-rate debt or inflation-sensitive budgets, this is not just central bank commentary. It has direct dollar implications.

Why the Bank of Canada is rethinking its inflation playbook

The BoC's inflation target of 2% remains in place, and Rogers reaffirmed the bank's confidence in this economic measure, but she acknowledged that the central bank underestimated how long inflation would stick after COVID-19 — and that its models failed to fully account for the scale of the supply shocks that drove prices higher.

As a result, the BoC has since widened the set of measures it uses to track underlying inflation. Rogers acknowledged that this new approach has, at times, created confusion — even signalling the appearance of moving the goalposts.

"So, we are reflecting on what we learned and on how we can improve our communications to guide expectations," she explained (2).

While the annual inflation rate cooled to 1.8% in February, Rogers and many other economists expect this rate to rise in the months ahead as higher gas prices persist and tariffs continue to hurt specific sectors of the economy.

For Canadians, this creates a difficult backdrop for households trying to plan: Inflation is low for now, but the factors that could push it higher are already in motion.

What 'more variable' inflation means for your mortgage and debt

Rogers explained that the BoC expects a "more variable inflation environment" in the coming years (3) — and borrowers, particularly those that rely on variable-rate loans, need to pay attention.

It could mean rate increases, not rate drops, in the near-term (4), even as many economists argue the slow pace of Canada's economic recovery does not justify higher rates.

That tension puts variable-rate mortgage holders and those carrying lines of credit in an uncertain position. In this hypothetical scenario, consider a homeowner with a $450,000 variable-rate mortgage: A 50-basis-point increase in the BoC's benchmark rate could add roughly $150 to $200 per month to their mortgage payments, depending on their amortization and terms. Those numbers aren't guaranteed — but they illustrate the real exposure that comes with rate uncertainty.

For Canadians renewing fixed-rate mortgages in 2026, locking in now versus waiting on future rate cuts involves a genuine trade-off. If inflation rebounds and the BoC responds with hikes, a floating rate could cost more than anticipated. If the economy stalls and rates fall further, variable-rate holders benefit.

There is no one-size answer — but the BoC's own signals suggest the range of outcomes is wider than it has been in calmer times.

What the Bank of Canada can and can't do with housing

Rogers addressed housing and affordability directly in her Manitoba speech, and her message was sobering for anyone expecting monetary policy to fix affordability. The BoC does not target home prices and is limited in what rate decisions alone can do to make housing more affordable for Canadians, she said (5).

Still, the BoC continues to review all factors that influence housing and while also monitoring shelter inflation.

For Canadians, Rogers remarks offer a practical takeaway: Canadians should not expect rate policy to rescue housing. Lower rates can fuel price gains; higher rates increase mortgage carrying costs. Either way, someone loses and someone gains and the math is rarely clean on either side.

What Canadians should do right now to prepare for volatility?

The BoC's mandate renewal — a scheduled five-year review with the federal government — is coming later in 2026. Part of this mandate renewal will be the Bank’s assessment of the impact of rapid rate swings. Turns out Canadians have made it clear: What we value is stability in both inflation and interest rates.

That feedback reflects what most households already know from experience: Sudden shifts in borrowing costs are expensive and hard to plan around.

To help, here are practical steps to consider before the next rate decision:

Review your mortgage terms. If you're on a variable rate or approaching renewal, model out what a 50-to-75-basis-point rate increase would mean for your monthly payment.