Bank of Canada Holds Policy Rate at 2.25% for Fifth Consecutive Meeting
On Wednesday, June 10, 2026, the Bank of Canada held its overnight lending rate steady at 2.25% for the fifth consecutive time in a decision widely expected by analysts.
The Bank immediately keyed on the lengthening duration of the conflict in the Middle East, which is causing high energy prices and rising inflation, also mentioning the ongoing uncertainty from U.S. trade policy.
Canada’s economic performance in the first quarter was weaker than expected, and the Bank noted that domestic financial conditions had loosened since issuing its Monetary Policy Report in April.
Employment strengthened in May, but looking through what’s often volatile labour data, the Bank views the labour market as largely unchanged since the beginning of the year.
Consumer Price Index (CPI) inflation rose to 2.8% in April largely due to higher energy prices. That said, the Bank made clear “there has been limited evidence of broad-based pass-through of higher energy prices to other consumer prices.” The Bank expects inflation to remain around 3% in the near term and seems willing to allow that provided inflation does not begin to creep beyond energy and become persistent.
In his statement, Governor Tiff Macklem reiterated that “economic weakness combined with rising inflation is a dilemma for monetary policy. Raising rates to dampen inflation could further slow the economy. Easing rates to support growth increases the risk that higher inflation becomes persistent. For now, holding the policy rate unchanged balances those risks.”
Importantly, the Bank’s Governing Council stated they would continue to “look through the war’s near-term impact on headline inflation but will not let higher energy prices become persistent inflation.”
With the conflict in the Middle East now in its fourth month after rounds of fruitless negotiation and renewed hostilities, consistently higher energy prices will eventually lead to entrenched inflation. Near the conclusion of his press conference, Governor Macklem stated if this scenario were to play out then “monetary policy will have more work to do—there may be a need for consecutive increases in the policy rate.”
The Bank of Canada will make its next scheduled interest rate announcement on July 15, 2026. The Bank’s next Monetary Policy Report will be released at the same time.
