Bank of Canada Building: By Taxiarchos228, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=11974266
OTTAWA — The Bank of Canada has left its key interest rate unchanged at 2.25 per cent, saying Canada’s economic recovery is gaining momentum even as uncertainty from conflict in the Middle East and evolving U.S. trade policy continues to cloud the outlook.
The central bank said growth has begun to strengthen after a sluggish period marked by tariffs, slower population growth and economic uncertainty.
The Bank projects Canada’s economy will grow 0.7 per cent this year before accelerating to 1.8 per cent in both 2027 and 2028.
The unemployment rate stood at 6.5 per cent in June and has remained between 6.5 and seven per cent since the end of 2024, reflecting what the Bank describes as ongoing economic slack.
Recent data suggest consumer spending remains solid, while housing activity appears to be stabilizing after a prolonged slowdown.
The Bank also expects export growth to continue, with business investment receiving a boost from the oil and gas sector.
Inflation rose to 3.2 per cent in May, largely because of higher gasoline prices linked to the conflict in the Middle East.
Excluding gasoline, inflation measured 2.2 per cent, while the Bank said its preferred measures of core inflation remain close to the two per cent target.
The central bank expects inflation to remain elevated in the short term before easing gradually and returning to about two per cent in early 2027, provided oil and gasoline prices stabilize.
The Bank said financial conditions have improved since April, although higher U.S. bond yields and lower Canadian yields have contributed to a weaker Canadian dollar.
Global growth is expected to slow to 2.75 per cent this year before recovering over the following two years.
The Bank said it will continue monitoring economic conditions and inflation and remains prepared to adjust monetary policy if necessary.
The next interest rate announcement is scheduled for Sept. 2.
Comments