Bank of Canada holds rates steady amid trade war risks

The Bank of Canada held its key interest rate steady at 2.25 percent on Wednesday, marking the seventh consecutive meeting without a change as policymakers navigate a complex landscape of rising inflation, a rebounding economy, and an escalating trade war with the United States. The decision, announced on September 2, 2026, keeps the overnight rate at its level since October 2025, reflecting the central bank's cautious stance amid significant global and domestic uncertainty. The hold comes as Canada's economy showed unexpected strength in the second quarter, with real GDP growing at an annualized rate of 3.3 percent, well above the Bank's earlier forecast of 2.5 percent. This broad-based expansion was driven by solid gains in consumption, a rebound in housing activity, and sharp increases in exports and business investment. The labour market has also improved, with the unemployment rate edging down to 6.4 percent in July, its lowest level in two years. However, this economic resilience is counterbalanced by persistent inflationary pressures and looming trade threats.