- Decision
- Maintain
- Rate change
- 0 bps
- overnight rate
- 2.25%
The Bank of Canada’s Governing Council left the target for the overnight rate unchanged at 2.25 percent on 10 June 2026, with the Bank Rate at 2.50 percent and the deposit rate at 2.20 percent, judging that weak domestic activity and lingering global risks offset near-term energy-driven inflation pressures. After two 25 bp cuts in September and October 2025 that lowered the policy rate from 2.75 percent to 2.25 percent, the rate has since been on hold. The operating band around the overnight target remains 25 bp, and no new liquidity measures were announced. Canadian GDP slipped 0.1 percent in Q1, the unemployment rate was 6.6 percent in May, and the central bank expects only a modest Q2 rebound, leaving the economy in excess supply; CPI inflation rose to 2.8 percent in April on higher oil prices and carbon-tax base effects, while core measures eased to around 2 percent and headline inflation is projected to hover near 3 percent before gradually returning to target. Financial conditions have loosened, equity markets are buoyant, bond yields volatile, and the Canadian dollar has weakened against the USD. Globally, the four-month-old Middle East conflict is lifting energy prices and disrupting supply chains, while persistent US tariff uncertainty clouds the outlook despite solid US demand, subdued euro-area growth and export-led resilience in China. The Council reiterated it will “look through” the war-related inflation spike but stands ready to act if higher energy costs threaten to entrench inflation, reaffirming its commitment to preserving confidence in price stability.
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.