Bank of Canada keeps rate at 2.25% as inflation risks rise

Editorial disclosure. This report provides educational business context. It is not financial advice, a rating or a transaction instruction.

The Bank of Canada left its overnight policy rate at 2.25% on September 2, while warning that risks to inflation had increased. The Bank Rate remained 2.5% and the deposit rate 2.20%.¹

A steady rate with a less certain outlook

The Bank said the economy and inflation had developed broadly as projected in its July Monetary Policy Report. Its September statement nevertheless described higher upside inflation risks and a more uncertain growth outlook because of new tariffs. It also reported that long-term bond yields had increased globally, including in Canada, since July.¹

July provides the comparison. At its July 15 decision, the Bank had also set the overnight target at 2.25%. It then expected inflation to return to around 2% in early 2027, explicitly making that projection conditional on the path of oil and gasoline prices.²

The Editorial Desk reads the two decisions as evidence that an unchanged policy setting can coexist with a changing risk assessment. The September statement does not establish that the next decision will move in either direction.¹²

What remains uncertain

The Bank said July inflation excluding gasoline was 2.2%, with core measures close to 2%. Its concern was the possibility that sustained energy costs would spread more widely into goods and services prices. That is a risk in the Bank's assessment, rather than a confirmed outcome.¹

What to watch next

The next scheduled rate announcement and Monetary Policy Report are October 28. The distinction to watch is between observed price changes and the Bank's assessment of their persistence; the calendar specifies a decision date, not a result.¹