Policy / The Canadian Discount /
Bank of Canada holds at 2.25% and projects 0.7% growth for 2026
The policy rate stayed at 2.25% on July 15, 2026; the Bank projects GDP growth of 0.7% this year and 1.8% in 2027 and 2028, with May inflation at 3.2% on oil prices tied to the Middle East conflict.
The Bank of Canada held its target for the overnight rate at 2.25% on July 15, 2026, with the Bank Rate at 2.5% and the deposit rate at 2.20%. Its July projection has the economy growing 0.7% in 2026 and 1.8% in each of 2027 and 2028. Headline inflation "rose further to 3.2% in May" while core measures stayed close to 2%, and the Bank expects inflation to return to around 2% in early 2027. Unemployment was 6.5% in June, inside the 6½% to 7% range it has occupied since the end of 2024 [1].
The statement is candid about what is driving the numbers. Global prospects "have been dented by higher oil prices stemming from the Middle East conflict"; Canadian growth "stalled as the economy adjusted to new tariffs"; business investment is expected to pick up "boosted in the near term by the oil and gas sector"; and the interest-rate gap with the United States "has contributed to the depreciation of the Canadian dollar." The Bank also notes that the Canada-US-Mexico Agreement "is now subject to annual reviews." The next decision is September 2 [1].
For a U.S. holder of Canadian shares the exchange-rate sentence is the one that matters. A weaker Canadian dollar shrinks the U.S.-dollar value of every Canadian-dollar dividend and of every Canadian-dollar earnings figure, while raising the Canadian-dollar revenue of exporters paid in U.S. dollars. The 0.7% growth projection is a reminder that the Canadian discount in 2026 has a macroeconomic component as well as a valuation one [1].
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Bank of Canada maintains the policy rate at 2¼%
'The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%'; 'Following GDP growth of 0.7% in 2026, the Bank projects the economy will grow by 1.8% in both 2027 and 2028'; 'CPI inflation rose further to 3.2% in May' while core 'remained close to 2%'; inflation expected to return to around 2% in early 2027; unemployment 6.5% in June, in a 6½%–7% range since the end of 2024; 'global economic prospects have been dented by higher oil prices stemming from the Middle East conflict'; 'Oil prices are still lower than their peak in April'; interest-rate differential 'has contributed to the depreciation of the Canadian dollar'; growth 'stalled as the economy adjusted to new tariffs'; 'Export growth has resumed'; business investment 'boosted in the near term by the oil and gas sector'; 'the Canada-US-Mexico Agreement is now subject to annual reviews'; next announcement September 2, 2026.
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