Bank of Canada Holds at 2.25% for a Sixth Straight Meeting

The Bank of Canada left its benchmark interest rate unchanged at 2.25% on July 15, 2026, the sixth decision in a row without a move. The announcement came together with the July Monetary Policy Report and a press conference led by Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers. The Bank Rate stayed at 2.5% and the deposit rate at 2.20%. This article sets out what the Bank said, the numbers in its new forecast, and what a steady rate means for people who borrow in Canada. It draws on the Bank's own press conference materials and on a published analysis from Desjardins Economic Studies, and it does not offer financial advice.

What the Bank decided

The Governing Council said the current policy rate remains appropriate to support the economic recovery and to bring inflation back to its 2% target. It also repeated that it is prepared to adjust monetary policy as needed. The statement described the economy as showing signs of improvement. According to Desjardins, the overnight rate has sat at the lower bound of the Bank's estimated neutral range since October 2025, which is why the Bank has been comfortable holding rather than cutting further.

One change in wording drew attention. The Bank dropped the illustrative scenarios it had published with its April 2026 report and removed references to possible rate hikes or cuts. Desjardins read this as a move toward a plainer message of waiting. With the economy still carrying spare capacity and inflation temporarily lifted by energy, the Bank does not appear to see a strong case to move in either direction.

Inflation: a gasoline story so far

Consumer price inflation rose to 3.2% in May. The Bank said the increase came mainly from higher gasoline prices. The more important detail for policy is what has not moved. Core inflation has stayed close to 2%, and so has inflation excluding gasoline. That pattern suggests the energy shock has not yet spread into the prices of other goods and services in a broad way.

The Monetary Policy Report projects headline inflation easing to about 2.5% in the second half of 2026 and returning to the 2% target by early 2027. The Bank stressed that this projection is highly dependent on developments in the Middle East. Macklem warned that inflation could get stuck above 2% if cost pass-through turns out larger than expected, or if the economy recovers faster than the forecast assumes. Desjardins quoted the governor as saying the Bank will not let higher oil prices become persistent inflation.

Growth and the labour market

The Bank estimates that the economy grew by 2.5% at an annualized rate in the second quarter of 2026, a rebound after the first quarter stalled. For the full year, its growth forecast was revised down to 0.7% from 1.2% in the April report. Projected growth for 2027 and 2028 is 1.8% in each year, and Desjardins noted that upward revisions to those later years broadly offset the cut to 2026. The Bank expects growth just above 1% in the first half of 2026 and around 1.5% in the second half.

The labour market remains soft. Unemployment has held in a range of 6.5% to 7% and was 6.5% in June. The Bank said excess supply persists in the economy, and that slack is one of the forces pushing price growth down. Consumer spending is expected to stay solid and housing activity to be stable, while business investment should pick up, helped in the near term by the oil and gas sector. Government spending and exports should keep strengthening, though on a lower path than previously expected.

The two dominant risks

The Bank named two risks above the rest. The first is the conflict in the Middle East, which affects the economy mainly through oil prices. The Bank's near-term forecast assumes oil settles between US$70 and US$75 a barrel. Macklem noted that since the forecast was finalized, the oil futures curve has moved higher and the conflict has re-escalated in recent days. Desjardins observed that oil was about US$10 higher on the morning of July 15 than the forecast assumption.

The second risk is the relationship with the United States, including the annual review of the Canada-United States-Mexico Agreement. Desjardins viewed the July 1 review passing without incident as a positive. The Bank listed upside risks to inflation as a weaker currency and more persistent cost pressures, and downside risks as tighter global financial conditions and a weak recovery in exports. It added that higher oil prices have weighed on global prospects since April, although investment tied to artificial intelligence is offsetting part of that drag in a growing number of economies.

The Canadian dollar

The Canadian dollar has weakened, which Macklem tied to a widening gap between rising US bond yields and Canadian yields that have been largely unchanged. He said depreciation cuts both ways. It makes Canadian exports more competitive, but it raises the cost of imported goods, which is one of the upside risks to inflation the Bank is watching.

What it means for borrowers

The overnight rate is the starting point for the prime rates that banks use to price variable-rate mortgages and lines of credit. With the policy rate unchanged, the base for those products has not moved at the July decision. Fixed mortgage rates are linked more closely to bond yields than to the overnight rate, so they can move even when the Bank does nothing. The Bank's own comments about rising US yields are a reminder that the cost of longer-term borrowing is shaped by markets as well as by the central bank.

For a household with a mortgage coming up for renewal, the practical point is that the Bank has not signalled a direction. It dropped the language about possible hikes or cuts, and it tied its outlook to oil and trade developments that it cannot control. Borrowers who need certainty can compare fixed and variable offers with their lender, and those who can absorb changes may weigh the flexibility of a variable rate. A lender or an independent mortgage professional can model both options against a household's own budget.

What analysts expect

Desjardins described the Bank's commentary as modestly more upbeat than in recent months and said growth looks broad-based. It listed lower oil prices and the smooth CUSMA review as positives, while noting that uncertainty about inflation persists. Its economists expect the Bank to stay on the sidelines for the rest of 2026. That is a forecast from one analyst, not a commitment from the Bank, and the Bank itself has said it will respond to incoming information.

What to watch next

Readers should look at three things. The first is monthly inflation, to see whether the gasoline effect fades and core measures remain near 2%. The second is the oil price relative to the US$70 to US$75 assumption in the Bank's forecast. The third is any news on trade with the United States. The Bank publishes its policy decisions and reports on its website, and its next scheduled decision date is listed in its public calendar. This article summarizes public statements and analysis and is not financial advice.