Key facts
- The Bank of Canada is anticipated to hold its key policy rate at 2.25% on Wednesday.
- All 36 economists surveyed by Reuters expect no change in interest rates.
- A majority of economists forecast no rate changes until at least July next year.
- Canada's economy rebounded more strongly than expected in April.
- The unemployment rate decreased to 6.5% in June.
- Annual inflation reached 3.2% in May, the first time above the 1%-3% control range since December 2023.
The Bank of Canada is widely anticipated to maintain its benchmark interest rate at 2.25% on Wednesday, according to a Reuters survey of economists. This decision comes as a rebound in economic growth following a technical recession, coupled with signs of easing underlying price pressures, reduces the urgency for rate adjustments.
All 36 economists polled by Reuters expect the central bank to hold rates steady, with a significant majority forecasting no change until at least July of next year. The upcoming announcement will coincide with the Bank of Canada's quarterly Monetary Policy Report, which will provide updated forecasts for economic growth and inflation.
While the economy has shown weakness, contracting in the final quarter of last year and the first three months of 2026, it rebounded more strongly than anticipated in April. Data released last week indicated that the unemployment rate edged down to 6.5% in June. The Bank's last policy move was a rate reduction in October, bringing the policy rate to the lower end of its estimated neutral range of 2.25% to 3.25%.
Inflation remains a key consideration, with annual inflation rising to 3.2% in May, surpassing the central bank's 1%-3% control range for the first time since December 2023, largely due to higher energy prices. However, core inflation measures have stayed near 2%, and gasoline costs have declined since the start of the US-Iran war. Bank of Canada officials have noted limited evidence that the energy price shock is broadly impacting consumer prices.
Economists at RBC observed that the spike in oil prices has not yet demonstrated significant signs of evolving into a broader, longer-lasting inflation shock. Governor Tiff Macklem previously stated that the Bank would look past near-term inflation increases related to the war, but would act if higher energy prices led to persistent, generalized price pressures. He also noted that substantial new U.S. trade restrictions could necessitate further rate cuts.
The April Monetary Policy Report had projected 1.2% growth and 2.3% inflation for the current year, and Wednesday's update is expected to revise these figures. The decision is scheduled for release at 9:45 a.m. ET, followed by a press conference with Governor Macklem and Senior Deputy Governor Carolyn Rogers.