Published 5 Sept 2026
The Bank of Canada Holds at 2.25% Again — but Warns Inflation Risks Are Rising
A fifth straight hold, a 3% headline inflation rate, and new tariffs: what the September 2 decision means for your borrowing costs and your projection.
On September 2, 2026, the Bank of Canada left its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. On the surface that is a non-event — nothing moved. But the reasoning behind the hold matters more than the number, because it tells you which way the next move is likely to go.
What the Bank actually said
The economy is doing better than it was. Second-quarter GDP grew 3.3% after a very weak first quarter, consumption posted solid gains, housing activity rebounded somewhat, and the unemployment rate edged down to 6.4% in July. The Bank described this as a broadening recovery.
The complication is inflation. Headline CPI has been hovering around 3%, driven mainly by gasoline. Strip out gasoline and inflation was 2.2% in July, with core measures near 2%. So the underlying picture is calmer than the headline — for now. The Bank flagged two risks that could change that: the ongoing Middle East conflict keeping oil prices and refinery margins elevated, and the new round of US tariffs plus Canadian counter-tariffs that will raise business costs and may feed into consumer prices.
What this means for your money
Variable-rate borrowing costs stay put. If you hold a variable mortgage, a HELOC, or a line of credit, your rate is unchanged for now. The next scheduled announcement is October 28, 2026, alongside a new Monetary Policy Report.
Long-term borrowing got more expensive. The Bank noted that financial conditions have tightened since July and long-term bond yields have moved up globally. Fixed mortgage rates track bond yields, not the policy rate — so a renewal quote today may be higher than it was two months ago even though the Bank did nothing.
Your gas line is doing the inflation work. With the gap between headline (3%) and ex-gasoline (2.2%) inflation this wide, the squeeze on most households is concentrated in fuel and anything that moves by truck.
Rate cuts are no longer the obvious next step. Governing Council said upside risks to inflation have increased. Planning on a lower policy rate in 2027 is now a bet, not a base case.
How to model it in AffordaFlow
A hold is a good moment to check that your projection is not quietly assuming relief that may not arrive. Two adjustments are worth making:
Set your debt interest assumptions to today's rate through at least the October decision rather than a declining path, and run a second scenario where rates sit flat through 2027.
Split your expense inputs so fuel and transportation escalate at roughly 3% while the rest of your basket escalates closer to 2%. Blending everything at one rate hides where the pressure actually is.
If you have a mortgage renewal inside the next 18 months, price it off current fixed quotes rather than off the policy rate — the two have moved in opposite directions since July.
Source: Bank of Canada maintains the policy rate at 2¼% (September 2, 2026).