On September 2, 2026, the Bank of Canada held its target for the overnight rate at 2.25% for a seventh consecutive decision.
Canada: unemployment rate
Key points
- GDP grew 3.3% in the second quarter after a very weak first quarter. Consumption, exports and business investment rose, and “there was some rebound in housing activity.”
- Unemployment edged down to 6.4% in July.
- New US tariffs and Canadian counter-measures followed the breakdown of trade talks between Canada and the United States.
- CPI inflation has hovered around 3% because of gasoline; excluding gasoline it was 2.2% in July. With the Middle East conflict ongoing, the Bank said upside risks to inflation have increased.
What it means for Calgary
The Bank left rates unchanged but its language shifted toward inflation risk, and long-term bond yields had moved up. That matters for fixed mortgage rates, which follow bond yields. If you are buying or renewing this fall, a rate hold from your lender is a cheap insurance policy.
The other rates
With the policy rate at 2.25%, the Bank Rate stays at 2.5% and the deposit rate at 2.20%. Canada’s big banks set their prime rates off the policy rate, so prime-based products, including variable-rate mortgages and home equity lines of credit, do not change after this decision.
A stronger economy, but more risks
Second-quarter growth of 3.3% followed very weak growth in the first quarter. The Bank said some of the strength was temporary, but the pickup was broad-based: consumption rose, exports and business investment were up sharply, and housing activity rebounded after several weak quarters. The labour market improved, with unemployment edging down to 6.4% in July, although the Bank still sees excess supply in the economy.
The risks have grown on both sides. Trade talks between Canada and the United States broke down and new tariffs and counter-measures followed, which makes growth less certain. At the same time, high oil prices and refinery margins, and little progress reopening the Strait of Hormuz, increase the risk that higher energy costs spread to other prices. Core inflation measures were still close to 2% in July.
The world outside Canada
Global growth has been broadly in line with the Bank’s July forecast. The US economy continues to grow solidly on consumer spending and technology investment, growth in the euro area was stronger than expected in the second quarter, and China’s economy slowed. Inflation remains high in most countries because of oil prices. The Canadian dollar appreciated slightly as the US dollar weakened. Governing Council said it will assess whether the rebound is sustainable and is prepared to adjust policy as needed. In other words, the Bank is watching closely, but it is not committing to a direction yet.
Why bond yields matter more than this decision
The Bank noted that long-term bond yields have moved up globally, including in Canada. Five-year fixed mortgage rates in Canada are priced off the five-year Government of Canada bond yield, so when yields rise, lenders tend to raise fixed rates even if the policy rate stays put. For Calgary buyers, that means the fixed rate you were quoted in spring may not be available now.
What to do now
- Buyers: ask your lender or broker for a rate hold, usually valid for 90 to 120 days, before you start making offers.
- Renewing in the next six months: most lenders will send renewal offers early; compare them with what other lenders offer instead of signing the first one.
- Variable-rate borrowers: nothing changes today, but the Bank’s language on inflation means the next move is not necessarily a cut.
- Next decision: October 28, with a new Monetary Policy Report.
