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Interest Rate Outlook Could Shift as Economic Risks Persist
Central bank maintains cautious stance. The Bank of Canada held its overnight rate at 2.25 per cent for the seventh consecutive meeting in September. The decision followed a notable improvement in domestic conditions, with second-quarter GDP growth surpassing expectations at a 3.3 per cent annualized growth rate and proving broad-based. Labour market conditions also strengthened with the unemployment rate falling to a two-year low of 6.4 per cent. At the same time, excess capacity remains in the economy, and trade uncertainty continues to cloud the outlook, limiting the need for immediate tightening. However, the Bank adopted a more hawkish tone, emphasizing that upside risks to inflation have increased and signalling a greater willingness to adjust policy should price pressures or economic activity prove stronger than anticipated.