The Bank of Canada has kept its benchmark interest rate unchanged at 2.25% for the sixth consecutive policy meeting, maintaining a cautious approach as the country’s economy continues to recover from a slow start to the year.
The decision, which was widely anticipated by economists, reflects the central bank’s growing confidence that Canada is gradually overcoming recent economic challenges while keeping inflation under control.
Bank of Canada Governor Tiff Macklem said the economy is still facing uncertainty, but policymakers believe the current interest rate remains appropriate to bring inflation back to the bank’s 2% target while supporting economic growth.
Although Macklem noted that the central bank remains prepared to adjust rates if economic conditions change, he indicated that the governing council believes the current policy stance strikes the right balance.
Recent economic indicators have shown signs of improvement after a weaker-than-expected beginning to the year. Earlier in 2026, Canada’s economy unexpectedly contracted, despite the Bank of Canada forecasting annualized growth of 1.5% for both the first and second quarters.
According to Macklem, Canada’s economic growth has been largely stagnant over the past year as businesses and consumers adjusted to new tariffs, persistent uncertainty and slower population growth.
In its latest Monetary Policy Report, the Bank of Canada expects those temporary setbacks to ease. Officials believe weaker auto production and slower-than-expected government spending during the first quarter will reverse, helping the economy grow by 2.5% in the second quarter.
Inflation, meanwhile, reached 3.2% in May after a global energy shock linked to the conflict in Iran drove gasoline prices sharply higher.
Despite the increase, the central bank said underlying inflation remains close to its 2% target once gasoline prices are excluded, suggesting that higher energy costs have not significantly spread to other goods and services.
However, the Bank of Canada cautioned that fuel prices remain highly volatile. Renewed tensions between the United States and Iran continue to put upward pressure on global oil markets, meaning gasoline prices could remain unpredictable in the months ahead.
For now, the central bank believes keeping interest rates unchanged provides the right level of support as Canada’s economy continues its gradual recovery while inflation trends move closer to target.
