Bank of Canada Expected to Hold Rates Steady Amid Inflation Risks

The Bank of Canada is set to leave interest rates unchanged at 2.25% when it meets on September 2, according to Continuum Economics.

Risks from both sides - Middle East tensions and Canadian trade retaliation against the US - pose inflationary risks, but no hints are expected that near-term easing will be considered.

The Bank of Canada has kept rates steady since its last easing in October 2025, with Governor Tiff Macklem noting in July that the greatest risks remained from the Middle East conflict and the trade relationship with the US.

However, with strong economic data showing a 3.3% annualized rise in Q2 GDP - stronger than the 2.5% expected by the BoC - employment growth has been healthy, and core inflation is finding a base near 2.0%, Continuum Economics predicts that policy will remain on hold before tightenings in Q2 and Q3 of 2027 take the rate to 2.75%.