FX.co ★ Bank of Canada Holds Rate as Expected

The Bank of Canada left its target for the overnight rate unchanged at 2.25% for a sixth consecutive meeting in July 2026, in line with expectations. The Governing Council noted that Canada’s economy has shown signs of improvement in recent months, despite the immediate impact of surging energy prices stemming from the conflict in the Middle East.

The Council added that it is unlikely economic growth will remain at its current elevated pace for long, but emphasized that the drivers of expansion are becoming more broad-based. The latest projections point to GDP growth slowing to 2.75% this year, before rebounding to 3.25% next year.

At the same time, inflation is expected to moderate as the effects of the energy price shock diminish. However, persistent geopolitical uncertainty keeps the outlook highly unpredictable, justifying no change in monetary policy settings for now. In its baseline scenario, the Bank of Canada expects CPI inflation to remain above the 3% mark in June and then ease in the following months, ultimately converging toward the 2% target by next year.