- Decision
- Maintain
- Rate change
- 0 bps
- overnight rate
- 2.75%
The Bank of Canada left its overnight rate target unchanged at 2.75 percent, with the Bank Rate at 3 percent and the deposit rate at 2.70 percent, citing persistent uncertainty around shifting US tariffs, a softer-but-not-weak domestic outlook and stickier underlying inflation pressures despite a headline CPI dip after the federal carbon tax cut. After two 25-bp reductions in January and March, the policy rate has been steady since April. The operating framework is otherwise unchanged. First-quarter GDP expanded by 2.2 percent—slightly above the April MPR forecast—thanks to front-loaded exports and inventory gains, but the Bank expects a “considerably weaker” second quarter as those temporary supports unwind; unemployment has risen to 6.9 percent. Headline CPI eased to 1.7 percent in April, yet inflation excluding taxes climbed to 2.3 percent and core measures firmed, while surveys show households and firms bracing for tariff-driven price increases. Global activity has been bolstered by pre-tariff stockpiling, risk assets have recovered from April’s turmoil and oil prices are broadly stable, but markets remain sensitive to US policy moves. The Governing Council will “proceed carefully,” monitoring the balance between tariff-related cost-push pressures and weaker demand, and stands ready to adjust policy to keep inflation well controlled.
Rate evolution
From June 2025 to September 2026, the Bank of Canada lowered its target for the overnight rate by 50 basis points to 2.25%, after holding at 2.75% through July 2025, cutting in September and October 2025, and then pausing through September 2026. The initial holds reflected high uncertainty over US tariffs and trade negotiations, while the cuts followed weakening exports and business investment, increased labour market slack and fading core inflation momentum, before the Bank said the overnight rate was about right if inflation stayed near 2% and activity evolved broadly as projected.
It held at 2.25% on June 10 and July 15, 2026, as uncertainty about US trade policy persisted and the conflict in the Middle East kept oil prices elevated, while the economy remained in excess supply even as growth picked up and broadened. On June 10, the Bank looked through a rise in headline inflation to 2.8% in April because core inflation had moved down to around 2% and there was limited evidence of broad-based pass-through, while warning it would not let higher energy prices become persistent inflation. By July 15, it judged the policy rate appropriate to sustain the recovery and return inflation to 2%, noting that second-quarter growth was estimated at 2.5%, consumer spending remained solid and export growth had resumed, while labour market conditions stayed soft and core inflation remained close to 2%. On September 2, the Bank again held the rate as the economy and inflation evolved broadly as forecast, noting that second-quarter gross domestic product rose 3.3% and the recovery broadened but excess supply persisted, while consumer price index inflation hovered around 3% mainly because of gasoline prices and core measures remained close to 2% in July, even as prolonged high oil prices and new tariffs increased upside inflation risks and made growth prospects more uncertain.