Here’s the Bank of Canada’s official statement for its rate decision:

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The Bank of Canada today held its target for the overnight rate at 2.25 per cent, with the Bank Rate at 2.5 per cent and the deposit rate at 2.20 per cent.

The continuing conflict in the Middle East is keeping energy prices high. As well, new U.S. tariffs and Canadian counter-measures have been announced following the breakdown of trade talks between Canada and the United States. Both situations remain fluid.

In the United States, economic growth continues to be solid, driven by consumer spending and 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 July Monetary Policy Report (MPR) projection. With still-high oil prices and elevated margins for refined energy products, inflation in most countries remains high.

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Financial conditions have tightened since July. Long-term bond yields have moved up globally, including in Canada. The Canadian dollar has appreciated slightly on U.S.-dollar weakness.

As expected, Canadian economic activity strengthened in the second quarter, with GDP up by 3.3 per cent, 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. Consumption showed solid gains. Following several weak quarters, there was some rebound in housing activity. Exports and business investment were up sharply. Labour market conditions have improved in recent months, with the unemployment rate edging down to 6.4 per cent in July. Still, demand for labour remains subdued and indicators point to continued excess supply in the economy.

Overall, recent data reaffirm Governing Council’s view of a broadening recovery in Canada’s economy. However, uncertainty is high and new U.S. tariffs and threats of further action pose risks to the sustainability of the recovery.

CPI inflation has been hovering around three per cent 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 per cent and measures of core inflation remained close to two per cent in July. However, 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. 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 U.S. tariffs and Canadian counter-tariffs will also raise costs for some businesses and could feed into consumer prices over time.

Source: Read the original article on financialpost.com

Additional coverage from financialpost.com:

Rising uncertainty has called the sustainability of the economy's rebound into question

The Bank of Canada on Wednesday held its key interest rate at 2.25 per cent for the seventh consecutive time, which was widely expected by economists due to the ongoing uncertainty from rising trade tensions and renewed hostilities in the war on Iran.

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The central bank said recent data reaffirm a “broadening recovery” in Canada’s economy and that second-quarter growth was broadly in line with July expectations, but the risks of higher and persistent inflation have increased.

Renewed hostilities in the Middle East have pushed Canada’s inflation rate to three per cent in July. New U.S. Section 338 tariffs and Canadian counter-tariffs will also raise costs for some businesses and could feed into consumer prices over time.

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Read the Bank of Canada’s official statement 

“There is still slack in the economy and the new American trade actions have increased uncertainty about how sustainable that rebound is,” Bank of Canada governor Tiff Macklem said.

“Inflation is running at three per cent. That’s too high. There’s no clear resolution (to the war in Iran) and the longer it goes on, the longer oil prices remain high and the greater the risk that higher energy prices start to spill into the prices of other goods and services.”

Macklem said the Canadian economy is in a stronger position than it was when the first round of U.S. tariffs was implemented in March 2025 and that businesses are starting to adapt to the higher tariffs by finding ways to manage uncertainty with U.S. clients, while exports have rebounded and business investment has improved over the last year.