Bank of Canada Holds the Rate at 2.25% in July 2026

As of July 2026, the Bank of Canada held its policy interest rate at 2.25%, the sixth meeting in a row with no change. Governor Tiff Macklem said he expects the economy to return to growth after a weak start to the year, while flagging the Middle East conflict and trade talks with the United States as risks outside the Bank's control.

I am Moe Asgarian, a real estate broker in Toronto and ranked 47th worldwide within RE/MAX, and rate decisions like this one land directly on the financing conversations I have with clients across the GTA every week. Here are the main points from the July 2026 meeting.

What the Bank of Canada Decided in July 2026

At its most recent decision meeting at the time, the Bank kept the main policy rate at 2.25%. The hold itself was predictable. Almost every economist expected exactly this decision in advance. Most of the economists who spoke to Reuters said they believe the Bank will not change the rate until at least July of the following year. This was the sixth meeting in a row where the Bank chose to leave the rate where it was.

One of the most important things Macklem said was that he expects the economy, after the ups and downs earlier in 2026, to get back on a growth path. The Bank also pointed to two things outside its control: the war in the Middle East, and the continuing trade negotiations with the United States. Its statement said risks and uncertainty remain because of those two factors, but officials said they are more confident than before that the Canadian economy is gradually working through these pressures.

Why the Canadian Economy Surprised the Bank Early in 2026

Growth had essentially stalled over the previous year, and the economy shrinking at the start of 2026 was unexpected for the Bank itself. It had earlier forecast that the economy would grow about 1.5% on an annualized basis in the first and second quarters.

In the Monetary Policy Report released with the July 2026 decision, the Bank said the factors that had weakened the economy are gradually fading, because households are spending more and the government has increased its own spending. One of the most important points in that report was the forecast of 2.5% growth for the second quarter of 2026. The Bank also said rising exports would likely lead companies to invest more in the following months, which feeds back into growth. It said there are clear signs the economy is growing again in the second quarter, even though the first months of the year ran into trouble.

Inflation at 3.2% and the Path Back to Target

Despite those points, inflation went up again in May 2026 and reached 3.2%. The main cause was higher fuel and food prices. In the statistics for that month, rising vegetable prices were one of the reasons inflation moved up.

The Bank said it was not yet seeing any sign that higher gasoline prices had pushed up the price of other goods. In effect it was waiting to see whether that gasoline increase feeds into overall inflation before taking any new action. It expected inflation to stay elevated in June 2026 and then gradually come down, forecasting 2.5% in the second half of 2026 and a return to its 2% target in early 2027.

Oil, the Middle East and the Risk of a Rate Increase

Macklem stressed in his statement that all of these forecasts depend heavily on what happens in the Middle East. He said the Bank had set aside the direct effect of higher oil prices on inflation for now, but the longer oil stays high, the greater the risk that the increase spreads into other goods and services. At the press conference he told reporters that if gasoline prices rise again and stay high for a long period, the Bank could raise the rate. He said the Bank would not allow higher oil prices to turn into lasting inflation. So a rate increase still looked like one of the options on the table to stop inflation from becoming entrenched.

The global picture mattered here, and most of all the continuing conflict between Iran and the United States. After the escalation between them and the threats around the Strait of Hormuz, the United States resumed its strikes and reinstated its naval blockade of Iran. As a result, oil reached its highest level in four weeks at that point in July 2026. Rising inflation alongside slowing growth had put the Bank in a difficult position: raising the rate controls inflation better but damages growth, and lowering it strengthens the economy but risks inflation climbing again.

What the Hold Means for Toronto and GTA Mortgages

Here is the part that matters if you are buying or renewing in Toronto or the GTA. A hold on the policy rate is not a hold on your mortgage rate. As of July 2026, fixed mortgage rates were still moving higher on these global developments, because fixed rates follow bond markets rather than the Bank's announcement day.

My own view at the time: I would not be too optimistic. Some positive figures made the short-term outlook look more encouraging, but a lot of uncertainty remained, and that does not allow for optimism over the long term. Swings in the oil price were still one of the least predictable factors for the Bank. We had been seeing decent activity in the Toronto and GTA housing market over the previous few months, which was real. But as with the economy, I would not tell a client to build a long-term financing plan around a rate forecast made under those conditions.

If you are weighing a purchase, a renewal or a sale in Toronto or the GTA and want to talk through the financing side of it, fill out the form at the bottom of this page or book a free consultation. Stay well and take care.