Bank of Canada holds key interest rate at 2.25%

Central bank sees signs of 'improvement,' expects inflation to ease

The Bank of Canada building in Ottawa on June 9.

Photo: The Canadian Press / Sean Kilpatrick

The Bank of Canada held its key interest rate at 2.25 per cent on Wednesday, predicting the economy would rebound after some rockiness earlier in the year.

A hold was widely expected by economists in the leadup to the decision — all 36 economists surveyed by ⁠Reuters ahead of the announcement expected the central bank to hold rates, with a majority forecasting no change until at ⁠least July next year.

This is the sixth consecutive rate hold by the central bank.

Canada’s economy is showing signs of improvement. Growth is picking up and inflation is projected to ease gradually from its recent spike, the bank's release said.

But the war in the Middle East and ongoing trade talks with the U.S. are still the big factors causing risk and uncertainty for the bank.

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While officials at the central bank noted that inflation rose further in May, the core measures — which strip out more volatile metrics — remained closer to their target. The bank expects inflation will remain high in June before easing in coming months, predicting the inflation rate will fall to 2.5 per cent in the second half of 2026, before reaching the two per cent target in early 2027.

But, the bank said that this is highly dependent on what happens with oil and gas prices due to the war in the Middle East.

And while Canada's economic growth hit snags in the first part of the year, there are clear signs that growth has resumed in the second quarter, according to the release. The bank predicted the economy will grow by 2.5 per cent in the second quarter.