Next BoC Interest Rate Decision on June 10 as Canada Enters Technical Recession

Key Takeaways 

• A hold at 2.25 percent on June 10 is widely expected. 

• Statistics Canada reported that the Canadian economy contracted 0.1 percent on an annualized basis in Q1 2026, following a revised 1 percent contraction in Q4 2025, meeting acommon definition of technical recession. 

• The Q1 GDP result fell dramatically short of expectations for 1.5 percent growth, complicating the Bank’s decisions for the rest of 2026. 

• Scotiabank Economics expects the Bank to raise rates later this year, with the first increase no earlier than September. 

Bank of Canada Interest Rate Decision Expectation on June 10 

The Bank of Canada has held its policy interest rate at 2.25 percent since October 2025. Most economists expect it to stay unchanged on June 10.  

The economy is slowing, but inflation has been rising due to higher oil prices tied to the ongoing war in the Middle East. That combination makes it likely that the bank will continue its wait-and-watch approach. 

Following GDP data released last week, markets now expect three 0.25 percentage point rate increases by year-end, according to Scotiabank Economics. Scotiabank expects the Bank to begin raising rates no earlier than September, reaching 3 percent by the end of 2026. 

Statistics Canada confirmed last week that Canada’s economy contracted for a second consecutive quarter, prompting fresh debate about whether the country has entered a recession and what, if anything, the Bank should do about it. 

What Is a Technical Recession? 

A technical recession is defined as two consecutive quarters of negative GDP growth. GDP, or gross domestic product, measures the total value of goods and services produced in a country.  

A technical recession does not mean that the economy has collapsed. It is only a signal that output has been shrinking rather than growing. 

Is Canada in a Technical Recession? 

By one common definition, yes. Statistics Canada reported on May 29 that real GDP contracted 0.1 percent on an annualized basis in Q1 2026, following a contraction of 1 percent in Q4 2025. The result surprised most forecasters, who had expected growth of around 1.5 percent for the period. 

Business capital investment fell 0.7 percent in Q1, its fifth consecutive quarterly decline. Dan Kelly, president of the Canadian Federation of Independent Business, said many small business owners have put investment on hold due to economic uncertainty and rising energy costs. 

Not all economists are ready to apply the recession label. Scotiabank Economics, on June 1, noted that the contraction was too shallow and too distorted by trade fluctuations to reflect a true recession. Consumer spending kept growing in Q1, and early signs suggest the economy picked up again in the second quarter, with growth of around 1.5 percent expected. 

Notably, on a per capita basis, real GDP increased 0.2 percent in Q1 2026, as Canada’s population declined for a second consecutive quarter. In other words, the average Canadian’s share of economic output grew slightly, even as the total contracted. 

After the GDP figures were released, Prime Minister Mark Carney acknowledged “some weakness” in the economy and said the data would be “uneven” as the government’s decisions to reduce immigration and cut spending work their way through the economy. 

Carney said part of the slowdown reflects “clear decisions by the government,” and that “the foundations are coming into place, settling in for that stronger, more resilient economy.” 

Balancing a Weakening Economy and Rising Inflation 

The Bank is navigating two forces pulling in opposite directions. 

On one side, the weakening economy, with two consecutive quarters of contraction, rising unemployment, and declining business investment, would normally push the Bank toward a rate cut. 

On the other, inflation rose to 2.8 percent in April, up from 2.4 percent in March, driven by higher oil and energy prices tied to the ongoing war in the Middle East. The Bank’s own April forecast projected inflation peaking at around 3 percent before easing back toward its 2 percent target by early 2027. Cutting rates while inflation is rising would risk making the problem worse. 

The CUSMA free trade agreement between Canada, the US, and Mexico is also up for renegotiation this summer. Scotiabank Economics has flagged the negotiations as a source of ongoing uncertainty that is weighing on business confidence and investment decisions. 

What a Bank of Canada Interest Hold Means for Newcomers 

The Bank of Canada’s policy rate affects the interest rates set by banks and financial institutions. These, in turn, affect mortgage rates, car loans, lines of credit, and returns on savings products like GICs and high-interest savings accounts. 

A hold at 2.25 percent on June 10 would mean that interest rates for borrowing and lending will likely stay roughly stable for now. 

But the outlook beyond June is less certain. Scotiabank Economics expects the rate to reach 3 percent by the end of 2026, with increases beginning no earlier than September. If that forecast proves correct, borrowing costs would rise meaningfully in the second half of the year. 

If you are approaching a mortgage renewal, it is worth getting quotes from multiple lenders sooner rather than later. Asking about rate holds is also worthwhile. Locking in a rate now protects you if increases arrive as expected. The next BoC announcement is July 15, when the Bank will also release its updated Monetary Policy Report and revised economic outlook for the rest of the year. 

Other BoC Rate Announcement Dates in 2026 

• July 15 (with Monetary Policy Report) 

• September 2 

• October 28 (with Monetary Policy Report) 

• December 9