Bank of Canada likely to hold interest rates amid economic uncertainty

By the Editorial Team · Friday, July 10, 2026

The Bank of Canada is expected to keep its benchmark interest rate at 2.25 percent in its upcoming meeting as it balances sluggish economic growth against persistent inflation pressures. This steady approach aims to avoid worsening either condition while market indicators forecast little change in the near term, though some investors anticipate a possible rate hike by late 2026.

The Bank of Canada is widely expected to keep its benchmark interest rate steady at 2.25 percent when it meets next week, as the central bank balances mixed signals from the economy amid ongoing uncertainty.

Economic growth in Canada remains sluggish, which could warrant a rate cut to stimulate activity. However, persistent inflationary pressures continue to pose risks that might justify raising rates. Clay Jarvis, a mortgage and financial specialist with NerdWallet Canada, said the bank faces a dilemma between addressing one issue without aggravating the other. “Treating one condition could exacerbate the other, so it looks like the bank will go the ‘do no harm’ route and maintain the overnight rate,” he noted.

The Bank of Canada’s policy rate has been unchanged since last October, when the central bank lowered it by 25 basis points. Since then, variable mortgage rates, which are closely tied to the overnight rate, have remained stable.

Market expectations largely align with a hold next week. Data from Bloomberg indicates that bond swap markets, which reflect investor sentiment on future monetary policy, have priced in a steady rate for the upcoming meeting. Still, some investors foresee the possibility of an interest rate increase by the end of 2026.

Meanwhile, fixed-term mortgage rates have hovered around 4 percent since the outbreak of conflict in Iran earlier this year. The geopolitical tensions have contributed to rising oil prices, which in turn have pushed up bond yields, leading to higher borrowing costs for fixed-rate mortgages.

Jamie David, senior director of mortgages at Ratehub.ca, observed a recent uptick in competition among lenders offering fixed rates, noting that many terms are now available just below the 4 percent level. “These are the most competitive fixed rates borrowers have seen since March, 2026,” he commented.

The Bank of Canada’s decision will be closely watched as policymakers seek to navigate the complex interplay of subdued growth, inflation concerns, and the broader global economic environment.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.