Bank of Canada expected to hold key interest rate at 2.25% this week

The Bank of Canada is widely expected to leave its key policy interest rate unchanged at 2.25 per cent when it announces its latest monetary policy decision on Wednesday.

Economists estimate there is a 95 per cent likelihood that the central bank will hold rates steady for a fifth consecutive meeting. According to market analysts, policymakers are likely to focus on ongoing geopolitical uncertainty linked to the conflict involving Iran, as well as the economic implications of the upcoming review of the Canada–United States–Mexico Agreement (CUSMA).

The decision comes as recent Statistics Canada gross domestic product data has pointed to weakness in the Canadian economy, with some analysts suggesting the country may be experiencing a technical recession. At the same time, Canada added 88,000 jobs in May, highlighting continued strength in the labour market.

Claire Fan, a senior economist at RBC, said the Bank of Canada is facing mixed signals on inflation and economic growth. She said policymakers do not yet have a clear picture of how those trends will evolve, making it more likely that the bank will continue to monitor incoming data rather than take significant action at this stage.

The central bank also left its policy rate unchanged at its previous meeting in April.