The Bank of Canada held its key interest rate at 2.25 per cent for the sixth time in a row yesterday, citing a similar growth outlook to that delivered in April.

Governor Tiff Macklem says while global growth was “dented” because of the Middle East conflict, and GDP growth in Canada remains flat, there are signs that the global and Canadian economies will rebound, albeit slowly.

He says the data received since April has increased the Bank of Canada’s confidence that “the economy is indeed working through this period of global upheaval.” He says Canada’s GDP growth is just 0.7 per cent this year, but is projected to grow by 1.8 per cent in both 2027 and 2028. “As the recovery proceeds, economic slack will gradually be absorbed.”

Macklem says war-related cost pressures are still working their way through some consumer prices, but are being offset by downward pressure from lower prices of other items due to continued economic slack.

“The recent depreciation in the Canadian dollar will make our exports more competitive, but it also increases the costs of our exports. Inflation is expected to stay elevated in June and then ease gradually in the coming months, returning to the 2 per cent target in early 2027.”