The central bank’s latest announcement arrives with the Canadian economy at a potential crossroads
The Bank of Canada has held interest rates steady in its latest decision, leaving its benchmark rate unchanged as its wait-and-see approach on the economic outlook continues.
The central bank said on Wednesday morning it was keeping its trendsetting rate, which leads Canadian variable mortgage rates, at 2.25%. That marks the seventh time in a row it’s left rate moves on ice and extends a run of holds dating back to December.
While speculation is continuing about a possible inflation uptick in the months ahead due to rising oil prices, today’s decision will come as no surprise to financial markets or mortgage market watchers.
The Bank was overwhelmingly expected to leave rates unchanged this morning – and economists also say the recent eruption of a full-blown US-Canada trade war could push possible rate hikes even further down the line.
Last week, Servus Credit Union chief economist Charles St-Arnaud told Canadian Mortgage Professional rate increases were off the table “until probably spring next year,” while others say it’s likely to take a more dovish approach to rates because of the economic threat posed by US tariffs.
What the BoC decision means for borrowers
Today’s decision probably keeps potential homebuyers in a holding pattern with variable rates remaining where they are. Home equity line of credit (HELOC) rates will also stay unchanged, while the announcement doesn’t directly affect fixed rates – although they could face upward pressure in the coming weeks.
Joel Fox, chief operating officer at Ownright, saw another rate hold by the BoC today as an inevitable move. “There’s still a lot of uncertainty around the economy, particularly with tariffs and inflation, so I don’t think they’re in a rush to make another big move right now,” he said.
“Higher oil prices have put some upward pressure on inflation, but the bigger concern is that tariffs could put pressure on prices at the same time as they weigh on economic growth.”
He didn’t rule out a move by the Bank to bring rates lower before the end of 2026 if the inflation outlook improves.
“I think they’ll want to see how growth and inflation develop over the next few months before making their next move,” he said. “If inflation keeps easing while the economy remains weak, I think we could see a rate cut later this year.
“For buyers, that means there’s no rush based on [the] decision. If rates come down later this year, buyers could actually see some relief in borrowing costs, so it’s worth keeping an eye on where inflation and the economy go from here.”
What’s next for the housing market?
While the BoC’s latest announcement means no relief on borrowing costs for now, a new Royal Bank of Canada (RBC) report suggests the housing market is facing improving prospects in some regions – even if it’s still sluggish in others.
RBC’s assistant chief economist Robert Hogue wrote that the national housing market “seems to be finally taking steps toward recovery in 2026” even if hurdles remain.
“We see room for further gradual progress ahead as improved affordability and brightening job prospects shore up confidence, increasingly unlocking pent-up demand and slowly draining piled up inventory,” he said.
“But, the path is unlikely to be smooth or uniform across the country. The prolonged market correction in Ontario and British Columbia has left a deep mark on sentiment that will take time to heal.”
The Bank of Canada has two further decisions scheduled this year, on October 28 and December 9.
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