What is Canada's monetary policy stance?

Latest release BoC rate decision, Sep 2, 2026

On hold, with the pressure pointing up. The Bank of Canada has held at 2.25%, the floor of its neutral range, through seven straight decisions, but says upside risks to inflation have increased. Bond markets lean the same way: the 2-year GoC yield is 3.27%, 102 bps above the overnight rate.

Plate 01 Overnight rate

As of Sep 2, 2026 (rate decision)

Seven holds in, the Bank now sees inflation risks tilting up.

NEUTRAL RANGE 2022 2023 2024 2025 2026 0%1%2%3%4%5% Policy rate

The Bank held at 2.25% on September 2, the seventh consecutive hold since the 25 bps cut on October 29, 2025, leaving the overnight rate at the floor of the neutral range. Governing Council said “the upside risks to inflation have increased, while new tariffs make growth prospects more uncertain,” and that it “is prepared to adjust monetary policy as needed.” The next decision, on October 28, comes with a new Monetary Policy Report.

Source: Bank of Canada rate decision and Monetary Policy Report.

Plate 02 BoC and Fed policy paths over time

As of Sep 2026

The Fed is widening the policy gap while the Bank holds.

0246% -2.50.02.5pp Jan 1996Apr 2006Jul 2016Sep 2026 BoC Fed Spread

The BoC-Fed policy gap stands at -175 bps, 25 bps wider than in August. The Fed raised its target range to 3.75 to 4.00% on September 16, its first change since a cut in December 2025, while the BoC held at 2.25% for a seventh straight decision.

Source: Bank of Canada Valet (overnight rate target); Federal Reserve (federal funds target range, upper bound).

Plate 03 2y GoC vs overnight

As of October 15, 2026 (GoC) / Sep 2026 (BoC-Fed)

The 2-year yield has pulled a full point above the policy rate.

2025 2026 2.3%2.5%2.8%3%3.3%3.5%3.8% 2y GoC Overnight

The 2-year GoC yield closed at 3.27% on October 1, 102 bps above the 2.25% overnight target: a bond market leaning toward a higher policy rate. Before this September the gap had not been that wide since October 2022, during the hiking cycle; it was 17 bps on October 30, 2025, the day after the Bank's last cut. The yield reached 3.40% on September 23, its highest close since July 2024.

Source: Bank of Canada Valet (2-year benchmark yield; overnight rate target).

Plate 04 BoC asset composition

As of September 30, 2026

Repos, not bonds, are now moving the balance sheet.

TOTAL ASSETS200400600 $bnGOC BONDS100300400T-BILLS0.00100150ADVANCES0.005.010 $bn20212024REPOS0.0010020020212024OTHER20406020212024

Repos rose $18.4 billion to $65.9 billion in the two weeks to September 30, nearly all of the $18.6 billion rise in total assets. Government of Canada bonds are still the largest asset, at $135.6 billion of $242.6 billion in total, about 56%, and have held near that level since a $9.0 billion step down in the week to September 2.

Source: Bank of Canada weekly statement (assets and liabilities; formerly Schedule B2).

Plate 05 BoC liability composition

As of September 30, 2026

Settlement balances have jumped above the Bank's operating range.

TOTAL LIAB. & EQUITY200400600 $bnBANKNOTES90110120GOC DEPOSITS50100150SETTLEMENT BAL.100300400 $bn20212024REVERSE REPOS0.00204020212024OTHER5.0152020212024

Settlement balances rose $20.4 billion to $83.4 billion in the two weeks to September 30, above the $50 to 70 billion operating range that held them at $63.1 billion on September 16. The Canadian Overnight Repo Rate Average, a measure of overnight funding costs, has been 3 to 6 bps above the 2.25% target every day since September 1, after sitting exactly on target in late August.

Source: Bank of Canada weekly statement (assets and liabilities; formerly Schedule B2).