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Bank of Canada holds overnight rate at 2.25% amid recovery signs

In its updated outlook, the BoC projects 2.5% annualized GDP growth in Q2 and expects CPI to average around 2% in early 2027 if oil prices stabilize.

Reported · Written up by our desk · Central Banks

The Bank of Canada held its overnight rate unchanged at 2.25%, extending a pause for a sixth straight meeting, while issuing a statement that leaned more constructive on domestic growth, according to Action Forex.

The BoC said financial conditions have eased since April and pointed to clearer signs that growth resumed in the second quarter, with consumer spending holding up, housing activity stabilizing, export growth returning, and business investment expected to strengthen, supported in part by oil and gas.

Policymakers emphasized that sources of economic growth appear to be broadening, and the Bank’s Monetary Policy Report estimated annualized GDP growth of 2.5% in Q2. It also forecast average growth of 0.7% for 2026 before accelerating to 1.8% in both 2027 and 2028 as excess capacity is absorbed.

On inflation, the BoC expects CPI to stay elevated in the near term after rising to 3.2% in May, largely due to higher gasoline prices tied to the Middle East conflict, while noting that inflation excluding gasoline is 2.2% and core measures remain close to target. The outlook depends on oil prices stabilizing, a scenario made more uncertain as Brent crude climbed back above $85 following renewed US-Iran hostilities.

Latest closeWTI crude $79.90 ▲2.2%|Brent $85.36 ▲2.5%|Gasoline (RBOB) $3.042 ▼3.9%

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