Bank of Canada Holds Steady at 2.25%: Market Update for Buyers and Sellers
On July 15, 2026, the Bank of Canada announced it is maintaining its target for the overnight rate at 2.25%, with the Bank Rate at 2.50% and the deposit rate at 2.20%.
The decision comes as Canada's economy continues to show signs of improvement, while global uncertainty remains elevated due to ongoing conflict in the Middle East and continued uncertainty surrounding US trade policy. Although inflation has risen in recent months, the Bank expects price pressures to ease gradually over time.
Global Economic Outlook Faces Ongoing Uncertainty
Since the April Monetary Policy Report, global economic conditions have been shaped by higher oil prices resulting from the conflict in the Middle East. While oil prices have eased from their earlier highs, ongoing geopolitical tensions continue to create uncertainty for global inflation and economic growth.
The United States continues to post solid economic growth, supported by strong consumer spending and continued investment in artificial intelligence. China's economy remains resilient thanks to strong exports, while growth in the euro area has been slower as higher energy costs continue to weigh on activity.
Overall, the Bank expects global growth to moderate in 2026 before strengthening again over the following two years.
Canadian Economy Showing Signs Of Recovery
Canada's economy experienced uneven growth over the past year as it adjusted to new tariffs, slower population growth, and ongoing uncertainty. However, recent economic data suggests conditions are beginning to improve.
The Bank estimates the economy grew by approximately 2.5% in the second quarter, supported by stronger consumer spending, improving export activity, stabilizing housing markets, modest business investment, and continued government spending.
Labour market conditions remain soft, with the unemployment rate sitting at 6.5% in June. While there is still excess capacity in the economy, businesses are increasingly adapting to trade-related uncertainty, providing greater confidence in the recovery.
Inflation Remains Elevated but Expected to Ease
Consumer Price Index inflation increased to 3.2% in May, primarily due to higher gasoline prices linked to the conflict in the Middle East.
Excluding gasoline, inflation measured 2.2%, while the Bank's preferred measures of core inflation remained close to the 2% target. Although higher energy prices continue to impact some consumer costs, broader inflationary pressures remain relatively well contained.
Policy Decision And Outlook
Given the improving economic outlook and expectations that inflation will gradually move back toward target, the Governing Council determined that maintaining the policy rate at 2.25% remains appropriate.
While economic conditions are improving, uncertainty remains high due to global geopolitical developments and trade policy risks. The Bank will continue monitoring incoming economic data and stands ready to adjust monetary policy if necessary to support sustainable growth and maintain price stability.
Looking Ahead
The next scheduled interest rate announcement is September 2, 2026.
For now, borrowing costs remain unchanged, providing buyers, homeowners, and businesses with continued stability while the Canadian economy continues its gradual recovery. The Bank will closely monitor inflation, economic growth, and global developments as it evaluates future interest rate decisions.
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