Bank of Canada maintains the policy rate at 2¼%

The Canadian economy has been adjusting to US tariffs and continued uncertainty about the review of the Canada‑United States‑Mexico Agreement, as well as slower population growth. Business investment has been roughly flat, exports and housing activity have declined and economic growth has been uneven. As a result, the level of gross domestic product was roughly unchanged from the first quarter of 2025 to the first quarter of 2026. The unemployment rate has generally fluctuated between 6½% and 7%, pointing to excess supply in the economy. Consumer price index inflation in Canada was close to the 2% target for more than a year and a half until the war in the Middle East began. The hostilities caused global oil prices to spike, pushing up gasoline prices. Inflation rose to 3.2% in May. However, inflation excluding gasoline, as well as measures of core inflation, stayed close to 2%. This suggests that, so far, spillovers to the prices of other goods and services remain contained. Canadian businesses are adapting to elevated geopolitical uncertainty stemming from US trade policy and developments in the Middle East. Despite some volatility, recent data suggest that the economy is evolving broadly in line with the outlook in the April Rep Bank of Canada sees 2026 growth at 0.7% (vs 1.2% in April MPR), sees 1.8% growth in 2027 (vs 1.6%), 1.8% in 2028 (vs 1.7%). BoC: Inflation to average 2.5% in 2026 (vs 2.3% in April), 2.0% in 2027 (vs 2.1%), 2.1% in 2028 (vs 2.0%). Just in | The Bank of Canada maintains its nominal neutral interest rate estimate at the midpoint of 2.25% to 3.25%, consistent with April's assessment.

Good morning. I’m pleased to be here with Senior Deputy Governor Carolyn Rogers to discuss our quarterly Monetary Policy Report and today’s decision. Governing Council maintained the policy interest rate at 2.25%. We have three key messages. First, after stalling over the past year, economic growth looks to have resumed in Canada. While US trade policy continues to be a headwind, consumers have been resilient and businesses are adapting. Second, inflation in Canada is poised to ease gradually provided global oil prices decline from elevated levels. Third, uncertainty remains elevated. The conflict in the Middle East has re-escalated in recent days and trade discussions with the United States are ongoing. Let me expand on the outlook, the risks and the implications for monetary policy. Global growth has been dented by the conflict in the Middle East, but with oil prices coming part way back down, growth is expected to recover. Equity markets have been buoyant, and credit spreads remain compressed. Canada’s GDP growth was flat over the past year as the economy adjusted to new tariffs, elevated uncertainty and slower population growth. The economy remains in excess supply. The labour market has been soft, with the unemployment rate hovering in a range of 6½% to 7%. GDP growth in the second quarter is estimated to have picked up to 2½%. While this rebound from the first quarter largely reflects the unwinding of temporary factors, sources of economic growth appear to be broadening. Recent indicators point to continue BoC: Uncertainty is still high. MACKLEM: DATA WE HAVE RECEIVED SINCE APRIL HAVE INCREASED OUR CONFIDENCE THAT THE ECONOMY IS WORKING ITS WAY THROUGH PERIOD OF GLOBAL UPHEAVAL MACKLEM: WE WILL NOT LET HIGHER OIL PRICES BECOME PERSISTENT INFLATION #OOTT

The Bank of Canada is set to deliver its fifth interest rate decision of the year this morning. Economists widely expect the central bank will remain on hold, keeping its policy rate at 2.25 per cent. Inflation has jumped above three per cent in recent months as higher oil prices from the Iran war sent gasoline costs skyrocketing over the spring. Officials ...