The Bank of Canada rate decision left the target for the overnight rate unchanged at 2.25%, while the Bank Rate remains 2.5% and the deposit rate 2.20%. In its policy statement, the central bank said the economy and inflation had developed largely in line with its July outlook.
The Governing Council said risks have become more difficult to assess. It pointed to elevated energy prices amid conflict in the Middle East, as well as newly announced U.S. tariffs and Canadian countermeasures after bilateral trade talks broke down.
Bank of Canada Rate Decision Flags Inflation Risks
Canadian consumer-price inflation has been near 3% recently, largely reflecting higher gasoline costs, the Bank said. Inflation excluding gasoline was 2.2% in July, while core inflation gauges were close to 2%. Policymakers said a prolonged period of high oil prices and refinery margins could push cost pressures into other goods and services. They also noted that tariffs could raise costs for businesses and eventually consumers.
The Bank said domestic growth accelerated in the second quarter, with gross domestic product increasing at a 3.3% pace after a weak first quarter. Consumer spending rose, housing activity rebounded, and exports and business investment increased, according to the statement. The unemployment rate edged down to 6.4% in July, although the Bank said labor demand remained soft and excess capacity persisted.
Officials said they will evaluate whether the recovery can endure and how the inflation outlook evolves. The next scheduled rate announcement and Monetary Policy Report are set for Oct. 28, 2026.
