Bank of Canada holds interest rates steady for seventh consecutive meeting

The Bank of Canada held its overnight rate at 2.25% on September 2, making it seven straight meetings without a move. The last time the bank actually pulled the trigger on a cut was October 2025, which means Canadian monetary policy has been effectively frozen for nearly a year.

Strong growth, stubborn inflation, uncertain everything

Canada’s economy grew at an annualized rate of 3.3% in the second quarter of 2026, meaningfully ahead of the Bank’s own forecast of 2.5%. Headline inflation climbed to 3% in July, pushed up mainly by gasoline prices. That 3% number sits above the Bank’s 2% target, and it arrives courtesy of a US-led military conflict with Iran and disruptions in the Strait of Hormuz that have kept energy markets on edge.

Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers both emphasized that the bank is watching whether the Q2 growth rebound is the real thing or a temporary burst before trade headwinds bite harder.

Core inflation, which strips out volatile items like fuel, has remained relatively stable.

The tariff problem sitting in the room

New US tariffs on Canadian goods are estimated to affect roughly $20 billion worth of exports, representing roughly a 50% increase in tariff burden on those products. Negotiations broke down, and Canada announced retaliatory measures scheduled to take effect around September 8.

The $20 to $28 billion range in tariff estimates reflects genuine uncertainty about scope, with some categories of Canadian goods remaining in negotiation.

What comes next and why it matters

The Bank of Canada’s next rate announcement is scheduled for October 28. Between now and then, policymakers will be watching whether inflation continues to track upward or stabilizes as gasoline price effects fade, how aggressively the US-Canada tariff standoff escalates after Canada’s September 8 countermeasures kick in, and whether the Q2 growth momentum carries into Q3 data.

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