- Decision
- Maintain
- Rate change
- 0 bps
- overnight rate
- 2.25%
The Bank of Canada held its target for the overnight rate at 2.25%, judging the current policy setting appropriate to sustain the recovery and bring inflation back to the 2% target as growth picks up and inflation is projected to ease gradually from a recent gasoline-driven spike, while risks tied to the war in the Middle East and US trade policy remain high. After holding at 2.75% in July 2025, the central bank cut by 25 basis points in September and again in October to 2.25%, where it has remained since. The Bank Rate was left at 2.5% and the deposit rate at 2.20%. In Canada, the central bank said there are clear signs growth resumed in the second quarter, estimated at 2.5%, with consumer spending solid, housing weak but stabilizing, and labour market conditions still soft; CPI inflation rose to 3.2% in May mainly because of higher gasoline prices, while inflation excluding gasoline was 2.2% and core measures remained close to 2%, with headline inflation expected to stay elevated in June and then ease gradually, returning to around 2% in early 2027. Financial conditions have eased since April, and higher US than Canadian bond yields have contributed to a weaker Canadian dollar. Globally, higher oil prices linked to the Middle East conflict have dented growth prospects and left the inflation path highly dependent on how the conflict unfolds, although AI investment continues to support activity in a growing number of countries. Governing Council said it will continue to assess the strength of the economy and the inflation outlook and is prepared to adjust monetary policy as needed.
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.