Bank of Canada Holds Rate at 2.25% as Economic Recovery Takes Hold

The Bank of Canada held its benchmark overnight interest rate at 2.25% on July 15, keeping the Bank Rate at 2.5% and the deposit rate at 2.20%, as it judged current policy appropriate to support a strengthening economy. Alongside the decision, the central bank published its quarterly Monetary Policy Report, describing an economy that has been weak but is now improving, with second-quarter growth estimated at about 2.5% as temporary drags unwind and the sources of growth broaden. Governing Council said headline inflation, which rose to 3.2% in May largely because of higher gasoline prices linked to the Middle East conflict, is expected to stay elevated in June before easing gradually toward 2% by early 2027; measures of underlying inflation remained close to target. Officials flagged continued risks from the war and US trade policy, noting that the Canada-US-Mexico Agreement is now subject to annual reviews. Labour market conditions stayed soft, with unemployment at 6.5% in June. The next rate decision is scheduled for September 2.