Bank of Canada Holds Rate at 2.25% | September 2026 Announcement

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Bank of Canada Holds at 2.25% as Trade Uncertainty Narrows Its Options

The Bank of Canada held its target for the overnight rate at 2.25% today, a seventh consecutive hold. The policy rate hasn’t changed since October 2025.

For anyone shopping for a mortgage, the more consequential number this week wasn’t the one the Bank published. The 5-year Government of Canada (GoC) bond yield climbed through August, pulling fixed mortgage rates higher. Here’s what changed since the July 15 announcement, and what it means for your mortgage strategy.

What the Bank of Canada Decided

The Bank’s decision leaves the policy rate at 2.25%, unchanged since the last rate cut on October 29, 2025. September was not a Monetary Policy Report meeting, so Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers took questions without a fresh set of projections behind them. The next monetary policy forecast arrives on the October 28 announcement.

The framing the Bank carried into September came from its July decision, when it judged the current rate appropriate to support the recovery and bring inflation back to target. At that point the Bank projected growth of 0.7% for 2026, rising to 1.8% in both 2027 and 2028. Its inflation path had headline CPI easing to roughly 2.5% through the second half of this year, then returning to 2% in early 2027.

Inflation since then has been an awkward read. Headline CPI reached 3% in July, at the top of the Bank’s 1% to 3% target range, while its preferred core measures averaged 2%, with CPI-trim at 1.9% and CPI-median at 2%. Almost the whole gap was due to the surge in gasoline prices. The Bank has said repeatedly that it will look through an energy shock as long as the shock stays contained, and core inflation has given it no reason to stop.

Why the Bank Held After Growth Came in at 3.3%

Last week, just days before the decision, Statistics Canada reported that real GDP grew 3.3% on an annualized basis in the second quarter, the fastest quarterly pace in more than 3 years. The print beat the Bank’s own July forecast of 2.5% for the quarter, and the same release revised Q1 growth up to 0.3% annualized from the flat reading first published. On a per-person basis, real GDP per capita rose 1% in the quarter, helped by a population that has now declined for 3 straight quarters.

A print that strong would normally argue against holding. Look at what produced it, though, and the argument thins. Business capital investment turned higher after 5 straight quarterly declines. Engineering structures (referred to as large-scale non-building infrastructure projects) rose 2.3%, and spending on computers and peripherals rose 16.7%, most of it imports of the processing units used in data centres. Residential investment rallied 2.5%, with resale activity leading the way in Ontario, Quebec, and British Columbia. The rest was exports, and exports are where the Q2 gets complicated.

The two releases covering Q2 describe those exports differently. In the GDP accounts, export volumes rose 3.6%, the strongest quarterly gain since early 2023, led by passenger cars and light trucks at 27% as Canadian auto production recovered. The balance of payments, which measures value rather than volume, puts energy in front. Goods exports rose 13.1% to a record $232.1 billion, and energy products jumped 27.4%. Crude oil and bitumen alone reached a record $44.8 billion as the war with Iran and the closing of the Strait of Hormuz lifted prices. Canada’s goods balance swung from a $6.4 billion deficit in Q1 to a $12.2 billion surplus, its largest since 2008, and the current account posted its first surplus since 2022.

Then, if you look at the calendar, the reference period ended June 30. Trade talks between Ottawa and Washington broke down in August, and the United States imposed 50% tariffs on roughly $28 billion of Canadian exports on August 22. Canada answered dollar for dollar, with counter-tariffs on $27.6 billion of American goods taking effect September 8. Statistics Canada’s own advance estimate has July GDP flat. The quarter the Bank was handed and the economy it has to set policy for are not aligned with its current direction.

The tariffs and the growth engine only partly overlap. Energy has so far been carved out of the US measures, along with potash, critical minerals, and goods already under Section 232 tariffs, which shelters the largest single source of the quarter’s export value. Motor vehicles have no such protection, and they are what drove the volume gain. Even after the rebound, auto exports stayed below their 2023 and 2024 quarterly average. One price surge sits on both sides of the Bank’s problem: the crude oil that lifted Q2 export earnings is refined into the gasoline that’s holding headline inflation at 3%.

Leaving the policy rate unchanged is a reasonable response to that gap. The Bank also has its own read on what counter-tariffs do to prices. Its study of the 2025 round found they raised the cost of targeted goods by about 6% and added roughly 0.3% to headline CPI at the peak of the shock. CIBC puts the price-level effect of this round at about the same 0.3%, reasoning that Ottawa picked goods with ready substitutes and expects the drag on growth to outweigh the lift to inflation. Oxford Economics puts it higher, at up to 0.5 percentage points on consumer prices next year. The Bank gets its August employment reading on September 4 and August inflation on September 14, both of which will describe conditions after the tariffs landed. Moving in either direction on September 2 would have meant setting policy on a quarter that had already closed.

Why Fixed Mortgage Rates Rose in August While the Policy Rate Did Not

Fixed mortgage rates are priced off Government of Canada (GoC) bond yields, not off the overnight rate. Bond investors set those yields, and what they’re pricing in is global inflation risk, US Treasury supply, and the oil market—none of which the Bank of Canada controls. A stable policy rate alongside rising fixed rates isn’t a contradiction because the 2 rates answer to different markets.

August made the point twice. On August 17, lenders raised fixed rates by 5 to 20 basis points across 3-, 4-, and 5-year terms. The trigger was the 5-year GoC yield closing at 3.31%, in reaction to a July inflation print that ran slightly hot. Four days later, a global bond selloff carried yields toward a 12-month high near 3.36%, and lenders repriced again, mostly by 10 to 15 basis points and, in a few cases, by 20. Not every lender followed either move, and some trimmed selected terms. The GoC yield hasn’t run straight up since. It closed at 3.26% on August 26, according to the Bank’s own bond-yield table, roughly 10 basis points below its August 21 level. 

Lenders have held that pricing and have not walked it back. The move also does some of the Bank’s work for it. The C.D. Howe Institute’s monetary policy council has made the point that higher bond yields tighten financial conditions on their own, which lowers the need for the Bank to tighten further. It may also have gone too far. Desjardins reads market pricing as taking the policy rate above 3.00% in 2027, against its own call of 2.75%, on the reasoning that permanently higher tariffs lower potential growth and therefore the neutral rate. If that view is right, bond yields can fall, and fixed pricing can ease without the Bank cutting at all.

For a borrower, the practical read is short. If you’re shopping a fixed term, the number that decides your pricing is the bond yield, and it can move daily without a word from the Bank. If you’re on a variable or adjustable rate, the Bank’s decisions are what matter, and the September announcement told you nothing changes for now.

What the Hold Means if You Have a Variable Mortgage

For borrowers holding an adjustable or variable mortgage, there is no change to your carrying costs or monthly payments over this statement cycle. Lenders set their prime rate off the Bank’s policy rate, so a hold leaves prime alone, and everything priced against prime remains unchanged.

If you hold a variable-rate mortgage (VRM), your payment was already fixed, and the split between principal and interest stays as it is. If you hold an adjustable-rate mortgage (ARM), your payment floats with the prime rate, so it remains unchanged.

The real change sits in what comes next. For most of 2024 and 2025, the case for a variable rate rested on cuts arriving and a borrower riding them down. That case is gone. Market pricing has flipped from asking when the Bank will cut to asking when it will hike. The consensus now runs to no move for the rest of 2026, with the first hike expected in the first half of 2027. In a Bloomberg survey, 63% of economists took that view, matching pricing in overnight swaps. The timing implied by that pricing still swung noticeably within single weeks in August, so treat any specific probability you see quoted as a dated snapshot.

Anyone weighing a switch should run the math first. A payment shock calculator will show what a 25- or 50-basis-point increase does to your monthly obligation. Whether that number is tolerable is the real question beneath the fixed-versus-variable debate.

What the Hold Means if You Have a Fixed Rate or a Renewal Ahead

Nothing changes mid-term for fixed rate holders either. Your interest rate and monthly payment were locked in when you signed, and a policy decision doesn’t affect a fixed term.

Renewal is where the September decision actually lands. The rate on offer at renewal today is not the rate that was on offer in mid-July, with 2 rounds of lender increases having occurred in between. Anyone with a maturity date within the next 6 months has a reason to start comparing now. The Bank’s October meeting won’t set fixed pricing in any case.

The renewal picture is also less punishing than the coverage around it suggests. In its Q3 disclosure, BMO reported that roughly half the mortgages it renewed came off at a lower payment than the borrower had been making. Borrowers who signed at the peak of the last tightening cycle are still renewing into lower rates, even with fixed pricing drifting up from its spring lows.

A rate hold is the practical protection while you shop. It fixes today’s pricing for a defined window, so a repeat of August’s bond move doesn’t reprice you mid-search.

What Could Change the Bank’s Mind Before October’s Meeting

The calendar between now and the next decision carries 4 dates that matter. Statistics Canada publishes August employment on September 4 and August inflation on September 14. Canada’s counter-tariffs take effect September 8. The Bank releases its summary of deliberations on September 16, the closest public view of the Governing Council’s reasoning.

Each one pushes in a specific direction. Core inflation broadening beyond gasoline would strengthen the case for a hike, since the Bank’s tolerance for the energy shock has always been conditional on exactly that not happening. The labour market points the same way. Employment added more than 180,000 jobs from May through July, and the unemployment rate hit a 2-year low. A tariff hit large enough to swamp the inflation picture would strengthen the case for a cut. RBC Economics puts the US measures now in force at about 5% of Canadian exports to the United States and about 0.4% of Canadian GDP and jobs. That is meaningfully real without being decisive.

RBC’s August 27 read allocates the risk in escalation rather than in the tariffs already applied. A significant escalation would damage growth enough to offset the inflation worry, and that is the path that would argue for cuts. On the measures as they stand, RBC expects the Bank to stay on hold for the rest of 2026.

The 2 risks are not weighted equally, though. Desjardins makes the point that the Bank had a plan for oil-driven inflation and a plan for trade escalation, but never set out what it would do when both occurred at once. Its inflation mandate obliges it to prioritise price pressures over growth when the two conflict, which pushes a cut further out than a balanced reading suggests.

Neither outcome is the base case today, and the Bank has been careful not to pre-commit. The workable assumption for a borrower is that the policy rate stays at 2.25% into the fall, with any move treated as the exception. Our mortgage rate forecast tracks the same inputs over a longer horizon.

Final Thoughts

The policy rate has now sat at 2.25% for close to a year, and September 2 added another decision that changed nothing about the rate itself. The announcement still carried information. The Bank is comfortable waiting while the tariff picture develops, and that patience leaves the more active side of mortgage pricing untouched.

Anyone shopping or renewing this summer who watched only the headline decision missed 2 fixed mortgage rate increases within 5 days in August. If you’re renewing before the end of the year or making a purchase now, connect with nesto mortgage experts to see where fixed and variable rates actually land for your renewal date and budget.

What nesto Borrowers Are Actually Doing

Forecasts are a dime a dozen. What distinguishes nesto’s vantage point is that we watch what Canadians are signing in close to real time, and the behaviour cuts through the noise.

Among nesto applicants in April 2026, 71% voiced an intent to go variable at the application stage, the strongest variable appetite in 17 months of nesto data. Yet by the time those same borrowers locked in a term, only 34% followed through on variable. The intent to float more than halved between the first conversation and the signature.

The destination was overwhelmingly fixed. Of every nesto borrower who committed to a term that month, 51.6% chose the 5-year fixed, and 5-year fixed commitments climbed 80.6% from a year earlier, more than double the 32.5% rise in the 5-year variable. The quickest mover was the 3-year fixed, whose share of nesto commitments jumped from about 7.8% in February to 14.3% in April. Borrowers were gathering around certainty well before the market made the upward path official.

How to Read the Hold From Where You Stand

Today’s rate hold means something different depending on your mortgage situation. You can stress test any of these against your own numbers using nesto’s mortgage payment calculator.

Buyers

Negotiating power still sits with you across much of the country, yet financing costs are not coming down anytime soon. A pre-approval locks a rate hold against bond swings that have jumped 35 to 40 basis points on a single headline this year.

Renewers

The wait-for-cuts strategy has no more runway. With fixed rates firming, holding out for a lower renewal carries genuine downside. When certainty outweighs the pursuit of the bottom, a shorter fixed term, such as the 3-year term, is what a growing share of nesto borrowers are settling for.

Refinancers

The refinance window is closing on borrowers whose equity has thinned, and the qualifying math turns less forgiving if prices ease. When a refinance is on your radar, moving sooner is the safer play.

Variable and Adjustable Holders

Your monthly payment is on hold today, but budget for higher-for-longer rather than imminent relief. The next move the market expects is higher, so leave yourself a cushion rather than banking on a cut.

The Signal Was in the Forecast

With the rate a foregone conclusion, the weight of the decision fell on the Monetary Policy Report. In April, the Bank sketched 2026 growth of 1.2% and average inflation of 2.3%. Heading in, Capital Economics looked for a modest downgrade to the inflation track after oil fell faster than that report had assumed. Tone mattered as much as the numbers, and markets parsed the language for any echo of June’s talk of “consecutive” hikes, which had unsettled bond yields.

The professional consensus is not unanimous. The C.D. Howe Institute’s Monetary Policy Council favours a hold at 2.25% into late 2026 and a step up to 2.5% by mid-2027. Oxford Economics sees growth of just 0.7% this year and unemployment drifting toward 7%, while TD looks for a sturdier economic rebound toward 1.7% by year-end. Scotiabank supplies the contrarian note on jobs, arguing the 6.5% rate flatters the slack in the market and that, measured on stricter US definitions, Canada would read closer to 5.1%, near full employment.

The sharper divide is between the two camps that set prices. Money markets still carry a partial hike for December; most bank economists see the rate frozen at 2.25% through 2026. That gap, not today’s hold, is the number worth watching, and whichever way the forecast leans will set the tone for fixed rates into the fall.

The Bottom Line for Borrowers

A sixth straight hold at 2.25% looks placid on the surface and carries real weight underneath. The Bank is keeping its options open, yet the market has largely concluded that the next move points up, and fixed rates are already reflecting it. With this report, the Bank delivered its first full forecast update since April, and attention now turns to the next decision in September.

The takeaway for borrowers is to stop planning around cuts that may never arrive and start planning around the rate landscape that actually exists. That is a conversation worth having with someone who lives in it daily, and nesto mortgage experts can weigh your options, secure a rate, hold it against bond swings, and match you to the term that fits your life rather than the headlines.

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