- Decision
- Maintain
- Rate change
- 0 bps
- overnight rate
- 2.25%
The Bank of Canada left its target for the overnight rate unchanged at 2.25% on 18 March 2026, citing a weaker-than-expected domestic growth profile and heightened downside risks even as the recent surge in global energy prices raises near-term inflation pressures. The policy rate has remained at 2.25% since it was lowered by 25 bp in October 2025. The operating corridor was kept at 30 bp, with the Bank Rate at 2.50% and the deposit rate at 2.20%. Canadian GDP contracted 0.6% in 2025Q4 after a 2.4% expansion in Q3, employment losses in early 2026 pushed the jobless rate up to 6.7% in February, and CPI inflation eased to 1.8% in February while core measures hovered around the 2% target; higher gasoline prices are expected to lift headline inflation in coming months. Externally, the CAD–USD exchange rate has been stable, but the Middle East conflict has driven oil and natural-gas prices sharply higher, tightened global financial conditions, and widened credit spreads. Governing Council will keep assessing the effects of US tariffs, trade uncertainty and the unfolding conflict, and reiterated that it stands ready to adjust policy if the outlook for growth or inflation materially changes.
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.