Bank of Canada holds overnight rate at 2.25% for fifth consecutive meeting

The Bank of Canada held its target for the overnight rate at 2.25 percent on Wednesday, its fifth consecutive decision to keep policy on hold. The Bank Rate remains at 2.5 percent and the deposit rate at 2.20 percent.

In the statement accompanying the decision, the Governing Council said economic activity in Canada had been weak, uncertainty about US trade policy persisted and oil prices remained elevated because of the conflict in the Middle East.

TWO-SIDED RISKS

Governor Tiff Macklem described economic weakness combined with rising inflation as "a dilemma for monetary policy", saying the Bank may need to cut further if the US imposes significant new trade restrictions, or raise rates if higher energy prices lead to ongoing generalised inflation. "Raising rates to dampen inflation could further slow the economy. Easing rates to support growth increases the risk that higher inflation becomes persistent," Macklem said, adding that for now holding the policy rate unchanged balances those risks and that monetary policy may need to be nimble.

Governing Council said it is continuing to look through the war's near-term impact on headline inflation, but will not let higher energy prices become persistent inflation. Macklem said the Bank would be watching closely for evidence of a broadening in price pressures.

TRADE POLICY OVERHANG

The statement noted that the US administration continues to propose new tariffs and that trade policy uncertainty remains elevated. Macklem said that if the United States imposes significant new trade restrictions on Canada, the Bank may need to cut the policy rate further to support growth.

The Bank of Canada has now held the rate at 2.25 percent at five consecutive decisions since its October 2025 cut. The statement did not pre-commit to a next move, saying: "As the outlook evolves, we stand ready to respond as needed."

The next scheduled interest-rate decision is on July 15, 2026, when the Bank will also publish its next Monetary Policy Report. The Bank said Canadian financial conditions had loosened since the April Monetary Policy Report, and that the Canadian dollar had weakened against the US dollar and other currencies. It said GDP edged down 0.1% in the first quarter and CPI inflation rose to 2.8% in April.