Bank of Canada Holds at 2.25%

No surprise today — the Bank of Canada held its key interest rate at 2.25%.

The Canadian economy is showing signs of improvement. GDP grew 3.3% in the second quarter, consumer spending picked up, housing activity improved somewhat, and unemployment edged down to 6.4%.

The concern is inflation. Headline inflation is hovering around 3%, largely because of higher gasoline prices tied to the ongoing conflict in the Middle East. Take gasoline out of the equation and inflation is a much more comfortable 2.2%, with core inflation close to the Bank's 2% target. Adding to the uncertainty are new U.S. tariffs and Canadian counter-tariffs, which could increase costs and eventually find their way into consumer prices.

What does this mean for real estate? For now, rates aren't moving in either direction.

The encouraging news is that the Canadian economy appears to be gaining some momentum, and we've seen a modest rebound in housing activity. The challenge is that higher energy prices and tariffs have made the inflation outlook less predictable — which could make the Bank cautious about cutting rates anytime soon.