As was widely expected, the Bank of Canada announced this morning that it is leaving its trend-setting policy interest rate unchanged at 2.25%—its sixth consecutive pause. The last time the Bank changed the policy rate was on October 29, 2025, when it reduced it by 25 basis points to its current level.  

With the Canadian economy showing some signs of life in the second quarter and the inflationary heat of the Iran war not yet passing through to core inflation, the Bank didn’t feel compelled to raise the rate (to cool inflation) or lower the rate (to stimulate the economy).

Both of these trends, however, are far from stable. The Canadian economy looks to be growing again, but not by a lot, and it wouldn’t take much to throw it off course. Inflation staying in check requires things to normalize in the Strait of Hormuz, but when this will happen remains uncertain with missiles flying again earlier this week. As the Bank said in its announcement this morning: “The path for global inflation is highly dependent on how the conflict unfolds.”

So what is the Bank of Canada saying might be next? It sounds like it is content to continue to leave rates alone: “Governing Council judges the current policy rate remains appropriate to sustain the economic recovery and bring inflation back to the 2% target.” At the same time, if the Canadian economy falters or inflation doesn’t cooperate, the Bank “is prepared to adjust monetary policy as needed.”

Bottom line: We continue to see the Bank holding this year and then raising the policy rate next year to 2.75%—the midpoint of the neutral range (2.25-3.25%).

The next scheduled date for announcing the overnight rate target is September 2, 2026.

Answer to the previous trivia question: The population of the Calgary-Edmonton corridor reached the three million mark in 2014. It is projected to reach four million in 2027.

Today’s trivia question: A car that would come to symbolize failure started production on this day (July 15) in 1957. What was the name of the car?