Bank Of Canada Holds Interest Rate At 2.25% In September

The Bank of Canada left its target for the overnight rate untouched at 2.25% on September 2, keeping the Bank Rate at 2.5% and the deposit rate at 2.20%.

Governing Council held, with the economy and inflation evolving broadly as forecast in July. The backdrop, though, has moved: long-term bond yields are up both globally and in Canada, financial conditions have tightened, and the Canadian dollar has ticked up slightly on US-dollar weakness.

Housing got its best line in months. GDP grew 3.3% in the second quarter, and the Bank pointed to a rebound in housing activity (after several weak quarters) as one piece of that growth, alongside solid consumption gains and a sharp jump in exports and business investment. Labour market conditions also improved — unemployment dropped down to 6.4% in July — though the Bank noted demand for labour remains soft, with excess supply still showing up in the numbers.

Inflation is a different story; CPI has been sitting around 3%, driven mainly by persistently higher gasoline prices. Take gas out of the equation and inflation was 2.2% in July, with core measures parked close to 2%. Upside risk to that inflation picture has grown too, tied to the ongoing Middle East conflict and stalled progress reopening the Strait of Hormuz — the longer oil prices and refinery margins stay elevated, the more room there is for those costs to bleed into other goods and services. New US tariffs and Canadian counter-tariffs sit on top of that, with the Bank flagging they could feed into consumer prices over time.

Governing Council tied its next move to two things: whether this rebound holds, and where inflation lands once the tariff and oil price pressure has rippled through the system.

The next rate decision is scheduled for October 28. A full 2026 schedule can be found here.