BoC Council Divided Over Canada's Economic Rebound
The Bank of Canada's Governing Council remains divided on whether Canada's economic rebound will last beyond the short term. In minutes released this week, council members acknowledged that the economy had shown resilience in the second quarter of 2026, with GDP growth projected at about 2.5%. However, they disagreed over how long this momentum would persist.
The central bank held its policy rate steady at 2.25% on July 15, marking its sixth consecutive hold. Despite concerns over inflation risks, the council agreed to look through the direct effects of higher energy costs on consumer prices. However, members warned that if oil prices remain elevated, there is a risk that their inflationary effects will broaden.
The minutes noted that some members flagged concern about upward drift in medium-term inflation expectations, even as longer-term expectations held firm. BMO chief economist Doug Porter expressed similar concerns, stating that the Bank may eventually feel compelled to raise interest rates if oil prices stay high.