- Decision
- Maintain
- Rate change
- 0 bps
- Overnight rate
- 2.25%
The Bank of Canada left its overnight rate target unchanged at 2.25 percent, with the Bank Rate at 2.50 percent and the deposit rate at 2.20 percent, as Governing Council judged the current stance consistent with keeping CPI inflation close to the 2 percent target while the economy works through US-related trade headwinds and slowing population growth. After cutting the policy rate by a cumulative 75 bp between January and October 2025, the central bank has held it steady at 2.25 percent since October. The policy corridor remains a 30-bp band around the target, and no new liquidity measures were announced. CPI inflation rose to 2.4 percent in December, but preferred core measures eased to about 2½ percent, and the Bank projects headline inflation to stay near 2 percent over the forecast horizon as trade-related cost pressures are offset by excess supply; GDP growth is expected at 1.1 percent in 2026 and 1.5 percent in 2027 after Q4 2025 output likely stalled, while the unemployment rate sits at 6.8 percent. Exports remain under pressure from US tariffs, the Canadian dollar has strengthened to just above USD 0.72, and oil prices are assumed slightly below October MPR levels. Globally, growth is seen averaging about 3 percent, with solid US activity driven by AI investment but tempered by tariff-induced inflation and wider geopolitical risks. The Bank reiterated that heightened uncertainty warrants close monitoring and stated it is prepared to adjust policy if the outlook shifts.
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.