Bank of Canada holds key rate at 2.25% as U.S. tariffs raise inflation risks

Aug 31, 2026 14:30 (21d ago)

Bank of Canada held its overnight rate target at 2.25%, with the Bank Rate at 2.50% and deposit rate at 2.20%.
Canada’s economy rebounded at a previously reported 3.3% annualized pace in the second quarter, while July ex-gasoline inflation was 2.2%.
The Bank said Middle East conflict, oil prices and new U.S. tariffs increased inflation and growth uncertainty.

The Bank of Canada held its overnight rate target at 2.25% on Wednesday, with the Bank Rate at 2.50% and the deposit rate at 2.20%, matching market expectations and leaving the benchmark unchanged for an 11th consecutive month. Policymakers balanced a broadening domestic recovery against excess capacity and greater inflation and growth uncertainty from elevated oil prices, the Middle East conflict and new U.S. tariffs. The economy rebounded strongly in the second quarter after a weak start, previously reported at an annualized 3.3%, while July unemployment edged lower but labour demand remained subdued. Inflation hovered near 3% in recent months, driven largely by gasoline; excluding gasoline, it was 2.2% in July and preferred core measures remained close to 2%. The S&P/TSX Composite Index rose more than 0.5% to above 36,000 after the decision.