- Decision
- Maintain
- Rate change
- 0 bps
- overnight rate
- 2.25%
The Bank of Canada on 29 April 2026 left its overnight rate target unchanged at 2.25% (Bank Rate 2.50%, deposit rate 2.20%), judging that the spike in energy prices from the Iran war will lift headline inflation only temporarily while domestic growth remains modest. After two 25-bp cuts in September and October 2025 trimmed the policy rate to the current level, the corridor and liquidity settings were kept intact. CPI inflation rose to 2.4 % in March, core inflation is just above 2 %, and the Bank expects headline inflation to peak near 3 % in April before returning to the 2 % target early next year; GDP growth is projected at 1.2 % in 2026, rising to 1.7 % by 2028, as excess supply is gradually absorbed amid a soft labour market with unemployment in the 6½–7 % range. The Canadian dollar has been stable against the appreciating USD, and higher oil prices are lifting national income given Canada’s net-exporter status. Globally, the Middle East conflict and US trade policy are fuelling volatile financial conditions, higher bond yields and stronger energy-led inflation, yet the Bank still sees world growth around 3 % through 2028. Governing Council is “looking through” the immediate energy shock but stressed it will act if higher prices threaten to de-anchor inflation expectations.
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.