The Bank of Canada held its overnight rate target at 2.25% on 15 July 2026, extending its pause to a sixth consecutive meeting as the Governing Council judged that the economy was showing signs of improvement while inflation, lifted by higher gasoline prices, was projected to ease gradually. In its accompanying Monetary Policy Report, the central bank cut its 2026 growth forecast to 0.7%, from 1.2% projected in April, and lifted its 2026 inflation forecast to 2.5% from 2.3%.
Governing Council said the current level of the policy rate was appropriate to sustain the recovery and bring inflation back to the 2% target, and that it was prepared to adjust monetary policy as needed. The decision leaves Canadian policy settings unchanged for another seven weeks while noting that growth had resumed in the second quarter.
GROWTH DOWNGRADE MEETS INFLATION UPGRADE
The downgrade to 2026 growth to 0.7%, from the 1.2% pencilled in at April's projection, reflects a weaker-than-expected start to the year, mainly a decline in government spending in the first quarter.
The upward revision to inflation to 2.5%, from 2.3% in April, reflects higher oil prices, elevated gasoline refinery margins and a weaker Canadian dollar, although the Bank said the broader outlook for inflation was little changed.
For the second quarter itself, the Bank of Canada estimated GDP growth at 2.5% annualised, largely reflecting the unwinding of temporary factors. The Bank said sources of growth appear to be broadening.
POLICY RATE HELD AS GOVERNING COUNCIL WAITS
In holding the overnight rate at 2.25% for a sixth consecutive meeting, Governing Council said it would continue to assess the strength of the Canadian economy and the outlook for inflation, adding that uncertainty is still high.
Governing Council did not signal a specific timeline for future action.
The Bank said there are still important risks and uncertainties related to the war in the Middle East and US trade policy. The next scheduled rate announcement is on 2 September 2026, and the next Monetary Policy Report will be released on 28 October 2026.