09/06/2026
In its sixth scheduled announcement of 2026, the Bank of Canada held the target for the overnight lending rate at 2.25%. This marks the seventh consecutive hold to interest rates since the Bank’s last cut in October 2025.
Canada’s economy strengthened in the second quarter, rebounding from weaker growth earlier in the year as consumer spending increased and housing market activity improved. However, escalating trade tensions are creating new risks for the economic outlook. In recent weeks, deteriorating trade negotiations with the United States have resulted in new tariffs and corresponding Canadian counter-tariffs, adding uncertainty to both growth and inflation. At the same time, the ongoing conflict in the Middle East continues to put upward pressure on energy prices.
“Since our last decision, inflation and growth in Canada have evolved broadly as forecast. Against that background we decided to leave the policy rate unchanged. However, the upside risks to inflation have increased, while new tariffs make growth prospects more uncertain,” said Tiff Macklem, Governor of the Bank of Canada, in a press conference following the announcement. “Governing Council will assess the sustainability of the economic rebound and the outlook for inflation, and is prepared to adjust monetary policy as needed. The Bank remains committed to maintaining Canadians’ confidence in price stability through this period of global upheaval.”
In July, the Consumer Price Index (CPI) rose 3.0% year over year, up from 2.8% in June.1 Gasoline prices remained the largest contributor to the increase, continuing a trend that began following the outbreak of conflict in the Middle East and the blockade of the Strait of Hormuz. So far, however, these inflationary pressures have remained largely concentrated in energy rather than spreading broadly across goods and services, suggesting underlying inflation remains relatively contained. Still, the Bank cautioned that the risks of broader price pressures have increased.
“The longer oil prices and refinery margins stay high, the greater the risk that higher energy prices spill over and turn into persistent inflation. In addition, the new US tariffs and the Canadian counter-tariffs could add costs for some businesses and feed into consumer prices over time,” said Macklem. “Monetary policy cannot offset the effects of tariffs or influence global energy prices. What we can do is ensure global developments don’t jeopardize price stability in Canada.”
