Bank of Canada holds interest rate at 2.25% for sixth meeting in a row

The Bank of Canada on Wednesday held its key interest rate at 2.25 per cent for the sixth consecutive time despite uncertainty over trade relations with the United States and the ongoing conflict in the Middle East.

The central bank’s last move was in October 2025, when it cut the overnight rate by 25 basis points.

Its decision to hold comes after the U.S. declined to renew the Canada-U.S.-Mexico Agreement (CUSMA) for another 16 years, triggering a rolling annual review for up to a decade, and the interim peace agreement between the U.S. and Iran appears to be in peril amid strikes from both sides.

Despite that, policymakers said Canada’s economy is showing signs of improvement, growth is picking up and inflation is projected to gradually ease from its recent spike.

“Although the Canada-U.S.-Mexico Agreement is now subject to annual reviews, more businesses report they are finding ways to navigate through the uncertainty,” they said in a statement. “Government spending also contributes to higher economic activity over the projection.”

Headline inflation rose to 3.2 per cent in May, largely driven by higher gas prices amid supply uncertainty, though core inflation was at 2.2 per cent.

Policymakers anticipate the next consumer price index (CPI) release will show inflation remained high in June, but will gradually fall to two per cent by early 2027, “although this forecast is dependent on the path for oil and gasoline prices.”

They also said there are “clear signs” economic growth has resumed in the second quarter, with gross domestic product estimated to have grown by 2.5 per cent. Solid consumer spending, potentially stabilizing housing activity, export growth and a projected increase in business investment — due to a boost from the oil and gas sector — contributed to their forecast.

The Bank of Canada predicts GDP growth of 0.7 per cent in 2026, followed by 1.8 per cent growth in both 2027 and 2028.

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