Central bank reveals latest call on interest rates as economic uncertainty continues
The Bank of Canada has left its policy rate unchanged, holding steady for a sixth consecutive announcement in a decision that will come as little surprise to mortgage and financial market watchers.
The central bank said on Wednesday that it was keeping its trendsetting interest rate at 2.25%, extending a streak that started last December and has stretched through all of 2026 to date.
The decision, which marked the Bank’s fifth interest rate announcement of the year, means variable mortgage and home equity line of credit (HELOC) rates will stay where they are for now.
Central bank delivers expected call despite inflation concern
Canada’s annual inflation rate ticked up to 3.2% in May, the first time in nearly two and a half years it surpassed the central bank’s 3% upper target, in a development that might normally have boosted the odds of a rate hike.
But Bank decisionmakers have maintained a wait-and-see approach to interest rates throughout the year to date amid a sluggish economy and continued uncertainty caused by the US-Israel war in Iran – meaning few observers expected anything other than a rate hold in today’s decision.
In a Canadian Mortgage Professional poll of mortgage industry members this week, 91% of respondents said they anticipated no change, with just 4% forecasting a rate hike and 4% expecting a cut.
Meanwhile, a Reuters survey of economists showed all 36 respondents expected a July hold, while a majority also said the next 12 months will likely see no further change.
A rise in gasoline prices sparked the latest inflation uptick – and while prices at the pump have since moderated, a fresh escalation in the war in Iran has raised questions over whether a further inflation shock is ahead.
Still, US tariffs introduced last year are continuing to weigh down the Canadian economy, even though the labour market eked out modest growth in June and the unemployment rate edged lower.
Market watchers search for clues on Bank of Canada’s next steps
The Bank of Canada’s last interest rate decision without a hold was in October, when it cut rates by 25 basis points for the second month in a row.
Its next decision on interest rates is scheduled for September 2, with further announcements on October 28 – which will also see the release of its next Monetary Policy Report – and December 9.
Governor Tiff Macklem and senior deputy governor Carolyn Rogers are scheduled to deliver remarks to the press later this morning, a conference that will be closely watched by financial markets for clues on the central bank’s likely path between now and the end of the year.
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