- Rate Cut: The Bank of Canada chose to hold its target for the overnight rate steady at 2.25%, keeping the Bank Rate at 2.50% and the deposit rate at 2.20%. No rate cut was introduced during this meeting as the Bank opts to maintain its current position.
- Economic Outlook: While Canadian growth stalled over the past year, economic activity rebounded in the second quarter of 2026 with an estimated 2.5% GDP expansion. The Bank projects modest overall GDP growth of 0.7% for 2026, which is forecast to pick up to 1.8% in both 2027 and 2028 as economic slack is slowly absorbed. However, the domestic labor market remains soft with the unemployment rate sitting at 6.5% in June.
- Inflation: Headline CPI inflation rose to 3.2% in May due to war-driven gasoline price hikes, though core inflation measures remain steady near 2%. The Bank expects headline inflation to remain elevated in the short term before gradually returning to its 2% target in early 2027.
- Monetary Policy Stance: The Governing Council maintains that the current 2.25% policy rate is appropriate to support economic recovery while steering inflation back to target. Given the highly volatile geopolitical climate in the Middle East and unpredictable US trade policies, the Bank is keeping its options open.
- The Bank’s next overnight rate target decision is scheduled for September 2, 2026.
The Bank of Canada held its target for the overnight rate steady at 2.25%
