The Bank of Canada Holds Interest Rate at 2.25%

The Bank of Canada Holds Interest Rate at 2.25% as widely expected, as it said growth would strengthen in the second half of the year as inflation pleasures eased.  Key takeaways from Governor Macklem’s statement:

• The BOC, which kept its rate at 2.25%. The decision marked the sixth time in a row that the central bank has kept its key policy rate unchanged after an aggressive easing cycle last year that brought the rate down to the current level in October

• "Canada's economy is showing signs of improvement. Growth is picking up and inflation is projected to ease gradually from its recent spike," the BOC said in its statement.

• The BOC raised its 2026 inflation forecast to 2.5% from 2.3% in April, but said inflation should remain near the midpoint of its 1%-3% target range over the next two years.

• Governor Macklem stated, "The data we have received since April have increased our confidence that the economy is indeed working its way through this period of global upheaval,"

• The bank slightly raised its growth forecasts for 2027 and 2028 but cut its 2026 projection to 0.7% from 1.2% in April, reflecting a weaker start to the year.

• The evolution of Canada's trade relationship with the United States and the war in the Middle East remain the two most important risks to the outlook for inflation, the BOC said in a quarterly monetary policy report.

The Bank of Canada will make its next interest rate decision on September 2nd