- Decision
- Maintain
- Rate change
- 0 bps
- overnight rate
- 2.25%
The Bank of Canada held its target for the overnight rate at 2.25% as the economy and inflation evolved broadly in line with the July Monetary Policy Report, while noting increased upside risks to inflation and greater uncertainty around growth from new tariffs. The central bank cut the rate by 25 basis points to 2.5% in September 2025 and by another 25 basis points to 2.25% in October, then held it unchanged. The Bank Rate remained at 2.5% and the deposit rate at 2.20%. Canadian gross domestic product rose 3.3% in the second quarter in a broad-based but partly temporary rebound, while the unemployment rate edged down to 6.4% in July, although indicators continued to show excess supply. Consumer price index inflation hovered around 3% amid persistently high gasoline prices, but inflation excluding gasoline was 2.2% and core measures remained close to 2% in July. The Canadian dollar appreciated slightly as the US dollar weakened. High energy prices linked to the continuing Middle East conflict, alongside new US tariffs and Canadian countermeasures, are sustaining global inflation pressures and clouding the outlook. Governing Council will assess the durability of Canada’s recovery and the inflation outlook and remains 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.