{"id":486478,"date":"2026-06-10T22:21:11","date_gmt":"2026-06-10T22:21:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/486478\/"},"modified":"2026-06-10T22:21:11","modified_gmt":"2026-06-10T22:21:11","slug":"bank-of-canada-holds-key-interest-rate-at-2-25","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/486478\/","title":{"rendered":"Bank of Canada holds key interest rate at 2.25%"},"content":{"rendered":"

Bank of Canada governor Tiff Macklem doesn\u2019t think the economy is in a recession<\/a>, but he does acknowledge some recent weakness — something other economists argue should give the central bank more leeway to keep its key interest rate steady for the rest of the year.<\/p>\n

The central bank\u2019s policy rate remains at 2.25 per cent Wednesday after the central bank\u2019s fifth consecutive hold, a move that was widely expected by economists.<\/p>\n

The Bank of Canada\u2019s rate decision arrived after days of debate over whether the country is in a recession, triggered by a second straight economic contraction in the first quarter of the year.<\/p>\n

Macklem said Wednesday that the economy was weaker than expected in the first quarter as U.S. trade policy and the war in Iran spur geopolitical uncertainty.<\/p>\n

Asked whether he thought the economy was in a recession, Macklem said that label isn\u2019t yet warranted — echoing the chorus of economists who argue the current downturn fails to meet that bar.<\/p>\n

\u201cBased on the data we\u2019ve seen to date, the economy is weak, but it is not clearly in recession,\u201d Macklem said.<\/p>\n

In its April forecast, the Bank of Canada called for growth of 1.5 per cent in the first quarter of the year. Macklem chalked much of that miss up to an unexpected pullback in government spending, which he said can be choppy from one quarter to the next.<\/p>\n

While there\u2019s been some volatility in the economy and labour market over the past year, Macklem said the wider trend is of flat growth, not a pronounced decline. More than half of Canadian industries were also growing in the first quarter of the year despite the marginal headline decline, he noted.<\/p>\n

Recent economic data, including a strong May jobs report, signals the economy could rebound in the second quarter of the year, Macklem said.<\/p>\n

\u201cSo far, we have not seen a significant, broad-based decline in economic activity,\u201d he said.<\/p>\n

\u201cRecession is not the word I would use.\u201d<\/p>\n

Macklem highlighted that the upcoming review of the Canada-U.S.-Mexico agreement, or CUSMA, comes with significant risks for the economy. An outcome that sees current tariff levels ratchet up, or that sees uncertainty persist into the second half of the year, would hamper Canada\u2019s economic recovery.<\/p>\n

\"\"MACKLEM <\/p>\n

Michael Davenport, senior economist at Oxford Economics, said he believes Macklem has the right interpretation of recent data, including sharp risks around the upcoming CUSMA renewal.<\/p>\n

\u201cThe Canadian economy is definitely a little bit weaker than we had thought, say, a couple of months ago, but we don\u2019t think that the Canadian economy\u2019s currently in a recession,\u201d Davenport said.<\/p>\n

Global oil prices — driven higher by the Middle East conflict — are meanwhile staying higher than first thought in the Bank of Canada\u2019s April forecast. Opposing pressures on prices and economic growth put the central bank in a dilemma, Macklem said.<\/p>\n

\u201cRaising rates to dampen inflation could further slow the economy. Easing rates to support growth increases the risk that higher inflation becomes persistent,\u201d he said.<\/p>\n

\u201cFor now, holding the policy rate unchanged balances those risks.\u201d<\/p>\n

Annual inflation rose to 2.8 per cent in April, in part because of the global energy shock. The Bank of Canada now expects inflation to hold around three per cent in the coming months before easing back toward the central bank\u2019s two per cent target.<\/p>\n

Macklem said there has so far been \u201climited evidence\u201d that higher energy prices are passing through into broader inflationary pressures.<\/p>\n

He said the Bank of Canada will keep looking through the short-term rise in inflation tied to the oil price shock. He also reiterated the central bank will act to prevent price pressures from becoming entrenched.<\/p>\n

Core inflation — a group of metrics the Bank of Canada uses to track underlying price trends — has cooled in recent months despite the rising headline rate. Macklem said the central bank \u201cmight have to take some action\u201d if that trend were to reverse course.<\/p>\n

Financial market odds call for the Bank of Canada to hold rates steady again at its next meeting on July 15, according to LSEG Data & Analytics. But markets are pricing in a quarter-point hike before the end of the year.<\/p>\n

\u201cWe think that misses the mark. We think the Bank of Canada is more likely going to remain on hold for the remainder of this year,\u201d Davenport said.<\/p>\n

In order for the central bank to raise its policy rate this year, he argued core inflation would have to pick up steam and price pressures would have to broaden across the consumer basket. Long-term inflation expectations from businesses and consumers would also have to rise, but those have so far been grounded in the wake of the Middle East oil price shock.<\/p>\n

\u201cNone of that, we think, is likely given the current weak macroeconomic backdrop,\u201d Davenport said.<\/p>\n

KPMG chief economist Ali Jaffery said in a media statement that the focus on recent economic weakness gave Macklem\u2019s remarks a \u201cdovish\u201d tone — suggestive of looser monetary policy rather than any tightening.<\/p>\n

Risks of persistent inflation seem low in the face of a soft economy, Jaffery argued.<\/p>\n

\u201cEven if the economy perks up in Q2 — which it likely will — there is a lot of room for non-inflationary growth when an economy is coming out of a hole like this,\u201d he said.<\/p>\n

CIBC senior economist Andrew Grantham said in a note to clients that Wednesday\u2019s rate decision reflects a \u201cvery patient central bank\u201d content to wait and see how the risks play out.<\/p>\n

He said CIBC continues to expect no change to the policy rate in 2026 as the current rate level supports a modest recovery in the economy starting later this year.<\/p>\n

This report by The Canadian Press was first published June 10, 2026.<\/p>\n

Related Stories<\/p>\n","protected":false},"excerpt":{"rendered":"Bank of Canada governor Tiff Macklem doesn\u2019t think the economy is in a recession, but he does acknowledge…\n","protected":false},"author":2,"featured_media":486479,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[114,184,85,46,853],"class_list":["post-486478","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-il","tag-israel","tag-national"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/486478","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=486478"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/486478\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/486479"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=486478"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=486478"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=486478"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}