The Bank of Canada held the policy interest rate steady at 2.25% on July 15, marking the sixth straight time the rate has remained unchanged since December 2025 [1, 2, 3, 4]. The Governing Council said the current rate is appropriate to sustain economic recovery and bring inflation back to the 2% target [1]. Governor Tiff Macklem noted, "With inflation pressures easing, we expect economic growth to strengthen in the second half of the year" [4].
The central bank forecasted annualized economic growth at 2.5% for the second quarter and 1.5% for the third quarter of 2026 [1, 3]. However, it revised the overall growth forecast for 2026 down to 0.7%, while raising projections for 2027 and 2028 to 1.8% [1, 3]. Headline inflation is expected to average 2.5% in 2026, up from a previous 2.3%, before easing back to the 2% target by early 2027 [1, 3]. The Bank said, "After a year of weakness, Canada’s economy is showing signs of improvement. Growth is expected to pick up, and inflation eases gradually from its recent peak. Uncertainty is still high." [1]
Risks remain elevated from the conflict in the Middle East and tense US trade policies, which the Bank identified as significant sources of uncertainty going forward [1, 2, 3, 4]. Meanwhile, Canada's May data showed inflation at 3.2%, still above the target, while unemployment fell to 6.5% [4]. Manufacturing sales hit a record C$78.1 billion in May, rising 1.3% [4].
The Canadian dollar traded around C$1.4057 per USD shortly after the rate announcement and rose to a four-week high near C$1.4032 per USD the following day [1, 4]. Canadian bond prices edged higher, with the two-year yield dropping about 4 basis points to 2.83% [1, 4]. The S&P/TSX Composite Index gained 0.31% led by financial, real estate, and mining stocks [4]. However, speculative bets against the Canadian dollar hit an 18-month peak after the announcement [4].
The Bank of Canada will continue to monitor economic strength and inflation outlook closely and remains prepared to adjust monetary policy as needed [1].
