The July BoC rate hold left the overnight rate at 2.25%, the Bank Rate at 2.5% and the deposit rate at 2.20% as improving economic activity met continued inflation pressure.

Policymakers said the current stance remains appropriate to support Canada’s recovery while guiding inflation back toward the 2% target.

Key Points From the July Decision

• The overnight policy rate remains at 2.25%.
• Canada’s economy is expected to grow 0.7% in 2026.
• Growth is projected at 1.8% in both 2027 and 2028.
• Second-quarter growth is estimated at an annualized 2.5%.
• Inflation reached 3.2% in May, largely because of gasoline.
• The next rate decision is scheduled for September 2, 2026.

Growth Is Returning After a Weak Start

Canada’s economy stalled as it adjusted to tariffs, slower population growth and continued uncertainty. However, the Bank now sees clear signs that growth resumed during the second quarter.

Consumer spending remains solid, housing activity appears to be stabilizing and exports have started growing again. Business investment is also expected to increase modestly, supported partly by the oil and gas sector.

The labour market remains soft. Employment was little changed in June, rising by 18,000, while the unemployment rate edged down to 6.5%.

Gasoline Keeps Inflation Elevated

Annual inflation increased to 3.2% in May, up from 2.8% in April. Gasoline prices rose 33.2% from a year earlier and accounted for much of the acceleration.

Inflation excluding gasoline was 2.2%, while the Bank’s preferred measures of core inflation remained close to 2%. The Bank said higher energy costs have not yet created broad inflation spillovers.

Inflation is expected to remain elevated in the near term before gradually returning to around 2% in early 2027. That outlook remains sensitive to oil and gasoline prices.

What the July BoC Rate Hold Means

The July BoC rate hold reflects the Bank’s view that 2.25% can support the economic recovery while inflation moves back toward target.

Policymakers will continue watching growth, inflation, oil prices and Canada-US trade conditions. Variable borrowing costs receive no direct policy-driven change, while fixed mortgage rates may still move with bond yields and market expectations.

The Bank’s next decision is scheduled for September 2, 2026.

Will the Bank cut in September or hold at 2.25% again?