Some Bank of Canada officials worried about growth, inflation expectations

By Erik Hertzberg

(Bloomberg) — The Bank of Canada’s governing council agreed the economy was “adjusting” to shocks, though some questioned whether the recovery was sustainable and others raised concerns about rising inflation expectations.

Policymakers held the policy rate at 2.25% for a sixth consecutive time when they met earlier this month, arguing that the economy was emerging from a period of stalled growth and that energy-driven inflation pressures were receding. 

Because of those factors, members of its rate-setting body felt “the trade-off facing monetary policy had diminished,” according to a summary of deliberations released Wednesday. “Members had gained more confidence in the projection that growth would strengthen in the second half of this year,” officials said.

At the same time, the summary suggests that the council’s confidence in that recovery wasn’t unanimous.

“There was a range of views among Governing Council members about the sustainability of the rebound beyond the near term. Members agreed they would need to monitor the data closely for signs that growth was broadening.”

The bank’s forecasts see growth accelerating from 0.7% this year to 1.8% in both 2027 and 2028. 

The rate decision took place before Trump threatened additional tariffs on imports of Canadian goods. The hostilities between the U.S. and Iran have also escalated since the rate decision. 

Still, the communications suggest the bank is likely comfortable holding borrowing costs steady. “Based on the forecast, the current policy stance was appropriate for sustaining the economic recovery and bringing inflation back to target,” the bank reiterated.

The bank’s summary says some officials were worried about “signs of upward drift in medium-term inflation expectations.”

Policymakers also debated the extent to which elevated energy costs related to the Middle East conflict were more broadly hitting prices in the rest of the economy. 

Officials said excess supply and “slow growth in unit labour costs” were putting downward pressure on service prices, and rent inflation had slowed due to weaker population growth. That helped offset the impact of higher gasoline prices. 

Previously, the central bank had said it faced a “dilemma” as it balanced inflation risks against ongoing economic slack.

–With assistance from Nojoud Al Mallees.

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Last modified: July 29, 2026