Research · September 2, 2026

Bank of Canada holds at 2.25% as rebound holds but risks mount

Governing Council kept the policy rate unchanged, citing broadly on-track growth and inflation, while flagging sharper uncertainty from energy prices and new tariffs.

The Bank of Canada left its policy rate at 2.25% on September 2, 2026, telling markets that the economy and inflation are evolving broadly as forecast in the July Monetary Policy Report. The case for staying put was straightforward: second-quarter GDP grew 3.3%, driven by consumption, a housing rebound, and strong exports and business investment. CPI Inflation stood at 3.0% in July, largely reflecting gasoline prices, while CPI-Trim (Core Inflation) sat at 1.9% and other core measures were close to 2%. The Canada National Unemployment Rate edged down to 6.4% in July, though the Bank noted that labour demand remains subdued.

Governing Council was candid about what has changed since July. Upside inflation risks have grown because the Middle East conflict is keeping energy prices elevated, with little progress on reopening the Strait of Hormuz. On the growth side, the breakdown of trade talks has produced new US tariffs and Canadian counter-measures, clouding the export and investment outlook. Financial conditions have also tightened, with long-term bond yields rising globally and the Canadian dollar slightly stronger on broad US-dollar weakness. The Bank said it is prepared to adjust policy as needed and will assess the sustainability of the rebound at its next announcement on October 28, 2026, alongside a new Monetary Policy Report.

ODIN had published a hold call on September 1, assigning it an 80.1% probability against 15.4% for a cut and 4.5% for a hike. The outcome matched that call. The prediction settles after a 46-day window in mid-October before a formal grade is recorded. Looking ahead to October 28, ODIN is watching three things: whether elevated energy prices pass through into core inflation or stay contained in headline CPI, how quickly the tariff shock shows up in export volumes and business investment intentions, and whether the modest improvement in the Canada National Unemployment Rate proves durable or stalls as labour demand stays soft. ODIN has filed a hold call for October 28 in its prediction ledger.