The Bank of Canada kept its policy interest rate at 2.25% on September 2, 2026, extending a holding pattern that stretches back to December 2025. That’s seven consecutive meetings without a move. But Governor Tiff Macklem made clear this patience has limits: if inflation doesn’t cool, multiple rate increases could be on the table.
The inflation picture is getting complicated
Canada’s Consumer Price Index has been running near 3% in recent months. That’s a full percentage point above the Bank’s target, and the primary culprit is energy.
Geopolitical tensions around the Strait of Hormuz have sent gasoline prices climbing, dragging headline inflation higher. Core inflation measures, which strip out volatile items like fuel and food, were sitting at approximately 2% as of July 2026. That’s right where the Bank wants them.
Governor Macklem has been emphasizing the risk that temporary inflation spikes become entrenched. Once businesses and consumers start expecting higher prices, those expectations can become self-fulfilling.
