Bank of Canada Holds Rate at 2.25% for Sixth Straight Decision

The Bank of Canada held its target for the overnight rate at 2.25% for a sixth consecutive decision, keeping the bank rate at 2.5% and the deposit rate at 2.20% as policymakers signalled increasing comfort with steady policy. The central bank said Canada's economy is showing signs of improvement, with growth picking up and its sources broadening, even as risks from the Middle East conflict and US trade policy persist. Its accompanying Monetary Policy Report lifted headline inflation projections for 2026, driven by elevated gasoline refinery margins expected to normalise as oil prices ease, while core inflation was still seen hovering around 2% through 2028. Notably, the bank dropped earlier explicit references to the potential need to cut rates if the US imposed new tariffs, or to raise rates if higher oil prices fed generalised inflation, a signal of greater confidence in the current stance. Growth is estimated to have rebounded to about 2.5% in the second quarter after a weak start to the year, with unemployment holding around 6.5%. Governor Tiff Macklem cautioned that the longer energy prices stay elevated, the greater the risk they spill into other goods and services.