The Bank of Canada has kept its key policy rate unchanged at 2.25%, saying the current level remains suitable as economic growth resumes and inflation begins to settle.
Credit: Bank of Canada
The Bank Rate remains at 2.5%, while the deposit rate is 2.20%.
Per the news release, Canada’s economy is estimated to have grown by 2.5% in the second quarter. Consumer spending has remained solid, exports are recovering and housing activity appears to be stabilizing. Business investment is also expected to improve modestly, helped in the near term by the oil and gas sector.
Still, the labour market remains soft. Canada’s unemployment rate stood at 6.5% in June and has stayed between 6.5% and 7% since the end of 2024.
The Bank now expects GDP growth of just 0.7% in 2026, followed by 1.8% in both 2027 and 2028.
Inflation rose to 3.2% in May, largely because of higher gasoline prices connected to the war in the Middle East. Without gasoline, inflation was 2.2%, while core inflation measures remained close to the Bank’s 2% target.
Officials expect inflation to remain elevated in June before gradually easing to around 2% in early 2027. That outlook, however, depends heavily on oil and gasoline prices.
Globally, the Bank expects economic growth to slow to 2.75% in 2026 before recovering to about 3.25% in 2027 and 2028. Strong consumer spending and artificial intelligence investment are supporting US growth, while China continues to benefit from exports.
The Bank said uncertainty remains high because of the Middle East conflict and US trade policy. Its next interest rate announcement is scheduled for September 2, 2026.