- Decision
- Maintain
- Rate change
- 0 bps
- overnight rate
- 2.75%
Bank of Canada’s Governing Council kept the overnight rate target at 2.75% (Bank Rate 3.00%, deposit rate 2.70%), judging that heightened but still-evolving US tariff uncertainty is restraining Canadian activity while underlying inflation pressures remain persistent. After a 25 bp cut in March, the central bank has held the policy rate steady at three consecutive meetings. The implementation framework is unchanged, with no new liquidity measures announced. Real GDP is estimated to have fallen 1.5 % in Q2 after a tariff-related export surge in Q1, excess supply has widened, the jobless rate edged up to 6.9 % in June and underlying inflation is around 2.5 %, with headline CPI at 1.9 %—close to the 2 % target—and projected to stay near that level through 2027 in the “current tariff” scenario. The Canadian dollar has firmed against a softer USD, while global growth is seen slowing to about 2.5 % by end-2025 amid volatile but broadly steady oil prices, firmer equity markets and higher long-term yields, as US trade actions cloud the outlook. The Council will “proceed carefully” and signals that a rate cut could be warranted if economic slack intensifies and tariff-related cost pressures remain contained.
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.