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Bank of Canada holds overnight rate at 2.25% amid easing inflation outlook
The decision kept the Bank Rate at 2.5% and the deposit rate at 2.20%, while the dollar weakened as US bond yields rose relative to Canada.
The Bank of Canada held its target for the overnight rate at 2.25%, keeping the Bank Rate at 2.5% and the deposit rate at 2.20%, according to Action Forex.
The central bank said Canada’s economy is showing signs of improvement, with growth picking up and inflation projected to ease gradually from a recent spike. It also pointed to risks tied to the war in the Middle East and US trade policy, noting that higher oil prices have dented global prospects since the April Monetary Policy Report.
In its outlook, the Bank projected global GDP growth would slow to 2.7% in 2026 due largely to the Middle East conflict effects, before recovering to around 3.25% in 2027 and 2028. It said financial conditions in Canada have eased since April and that US bond yields have risen, with the resulting rate differential contributing to the depreciation of the Canadian dollar.
The Bank also noted that Canada’s labour market has remained soft, with the unemployment rate at 6.5% in June and hovering in a 6.5% to 7% range since late 2024. It cited estimates for second-quarter growth of about 2.5%, stabilizing housing activity, resumed export growth, and expectations for modest improvement in business investment supported near term by the oil and gas sector.