Bank of Canada rate pause remains in effect as fall 2026 approaches
- Economic insights
- Sep 2, 2026
- First National Financial LP
For the seventh time in a row, Canada’s central bank has opted to maintain its overnight policy interest rate at 2.25%, unchanged since October of 2025.
This decision was widely anticipated, but as always, the Bank provided new insights into its thinking and updated its economic and market outlook.
We capture the BoC’s comments from its September 2, 2026 report below.
Canadian Economic Performance and Outlook
- Canadian economic activity strengthened in the second quarter, with GDP up by 3.3%, following very weak growth in the first quarter
- While some of the recent strength reflected temporary factors, the pick-up in activity was broad-based and consumption “showed solid gains”
- Exports and business investment were up sharply
Inflation
- CPI inflation has been hovering around 3% in recent months, mainly because of persistently higher gasoline prices
- So far, there has been little evidence of higher energy prices spreading to other components of inflation
- Excluding gasoline, inflation was 2.2% and measures of core inflation remained close to 2% in July
Canadian housing and employment
- Following several weak quarters, there was “some rebound” in housing activity
- Labour market conditions have improved in recent months, with the unemployment rate edging down to 6.4% in July
- Still, demand for labour remains subdued and indicators point to continued excess supply in the economy
Global economic commentary
- In the United States, economic growth continues to be solid, driven by consumer spending and Artificial Intelligence (AI)-related investment
- Growth in the euro area was stronger than expected in the second quarter, while China’s economy slowed
- Overall, the global economy has shown resilience in the face of geopolitical headwinds, with growth broadly consistent with the Bank’s July Monetary Policy Report (MPR) projection
- With still-high oil prices and elevated margins for refined energy products, inflation in most countries remains high
Financial conditions and bond yields
- Financial conditions have tightened since July
- Long-term bond yields have moved up globally, including in Canada
- The Canadian dollar has appreciated slightly on US-dollar weakness
Special mentions
In its statement, the Bank made special mentions of the continuing conflict in the Middle East (which it observes is keeping energy prices high), as well the breakdown of trade talks between Canada and the United States (which has led to new US tariffs and Canadian counter-tariff measures). The Bank described both situations as “fluid.”
The Bank also noted that recent data “reaffirm” its view of a broadening recovery in Canada’s economy. However, the BoC also acknowledged that uncertainty is high and new US tariffs and threats of further action pose risks to the sustainability of the recovery.
Furthermore, the BoC offered that: “With the Middle East conflict still ongoing and little progress reopening the Strait of Hormuz, upside risks to the Bank’s inflation forecast have increased.” Indeed, the Bank said, “the longer that high oil prices and elevated refinery margins persist, the greater the risk of spillover to the prices of other goods and services.” New US tariffs and Canadian counter-tariffs will also raise costs for some businesses and could feed into consumer prices over time.
The Bank’s outlook
The Bank noted that with the economy and inflation evolving broadly as forecast, it decided to leave its policy interest rate unchanged. However, as noted above, it also acknowledged that the “upside risks” to inflation have increased, while new tariffs make growth prospects more uncertain. Consequently, the Bank said that its Governing Council will assess the sustainability of the economic rebound and the outlook for inflation, and “is prepared to adjust monetary policy as needed.”
The Bank finished its statement by reminding Canadians that it remains committed to maintaining our confidence in price stability through this “period of global upheaval.”
Next up
The Bank is scheduled to make its next policy interest rate announcement on October 28, 2026. First National’s executive summary will follow. In the meantime, please visit this website for other important insights.
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