What is Canada's monetary policy stance?

The Bank held the overnight rate at 2.25% on July 15, the sixth consecutive hold since the 25 bps cut on October 29, 2025 — and retired June's “dilemma” framing, calling the rate “appropriate to sustain the economic recovery and bring inflation back to the 2% target.” From the floor of the neutral range, the Bank still flags the same two risks — the Middle East war and US trade policy — but on the trade side, more businesses report finding ways to navigate the uncertainty.

The BoC-Fed gap stands at -150 bps, narrowest since February 2025 and 25 bps off the -175 trough sustained from March through November 2025, when the BoC out-cut a Fed already a full point into its own easing. One December Fed cut has done the closing work; the BoC has held since October.

The 2-year Government of Canada yield closed at 2.88% on July 13, up 6 bps on the latest close, and holds roughly 60 bps above the 2.25% overnight target. That gap leaves the market priced for the Bank to stay put — the implied path edges higher into late 2026, not lower — even as the Bank's own triggers point both ways.

The asset side has settled into a shape defined by what's left of the pandemic-era bond-purchase programme. Government of Canada bonds account for $146.0 billion of $220.0 billion in total assets — about 66% — easing lower as the portfolio matures while the total holds steady. Quantitative tightening is complete; repos run in a roughly $15 to 40 billion range as the operating margin of the floor system.

Banknotes carry $123.9 billion of $220.0 billion in total liabilities — about 56% — drifting up only $30 billion over six years as a passive function of currency demand. Settlement balances sit at $64.3 billion, inside the $50 to 70 billion operating range and a small fraction of the near-$400 billion peak in early 2021. Reverse repos are at zero — none of it is doing policy work.