Why the Bank of Canada Is Expected to Hold Interest Rates

By Tahani Elghazaly
Published July 12, 2026

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The Bank of Canada is widely expected to leave its benchmark interest rate unchanged at its upcoming policy meeting, as policymakers seek to balance persistent inflation with signs of a gradually improving economy.

The expectation follows a series of mixed economic indicators. Canada's labour market has continued to add jobs while the unemployment rate has eased, but core inflation remains above the Bank's 2% target, complicating the path for monetary policy.

Economists say the central bank is likely to remain cautious rather than rush into another rate cut, warning that easing policy too quickly could reignite inflationary pressures, particularly in housing and service sectors. At the same time, another rate hike could increase borrowing costs for households and businesses already facing elevated debt payments.

The Bank is also closely monitoring developments in the U.S. economy, global trade, and financial markets, all of which could influence Canada's economic outlook during the second half of the year.

Analysts note that holding interest rates steady would give policymakers more time to assess the full impact of previous monetary policy decisions, since changes in interest rates typically take months to work their way through the economy.

If the Bank of Canada keeps rates unchanged, attention will quickly shift to the tone of its policy statement and economic outlook. Investors will be looking for clues about when the next rate cut could come, provided inflation continues to moderate and price stability improves.