Bank of Canada Set to Hold Rate at 2.25% as Renewal Wave Pressures Borrowers

The Bank of Canada is widely expected to hold its benchmark policy rate at 2.25% at its July 15 announcement, with bond markets implying roughly a 91% chance of no change. Most of the country's large banks expect the rate to stay put through 2026, though a couple project a modest increase later in the year. The central bank has signalled it will remain nimble, indicating it could cut if the United States imposes significant new trade restrictions or move to consecutive increases if the Middle East conflict keeps energy prices elevated and inflation broadens. While Canadian core inflation sits near the 2% target, the main upward pressure on borrowing costs has been imported: hawkish signals from the US Federal Reserve have kept Treasury yields, and by extension Canadian government bond yields, elevated. In early July the five-year Government of Canada yield spiked to a seven-week high near 3.18% on renewed US-Iran tensions before easing back toward 3.13%. That leaves fixed mortgage rates around 4% or higher even as the lowest variable rates sit near 3.3%, a concern as a large cohort of borrowers faces renewals at higher rates this year.