Canada’s inflation holds at 2.6% as Bank of Canada keeps rates on hold at 3.25%

Key Takeaways

• Canada’s CPI inflation rate stood at 2.6% in May 2026, according to Statistics Canada.
• The Bank of Canada held its key interest rate at 3.25%, with its next decision scheduled for July 10, 2026.
• Canada’s GDP grew at an annualized rate of 1.7% in the first quarter of 2026, Statistics Canada reported.
• Annual GDP growth for 2025 was 1.5%, driven by a stable housing market and strong energy exports, per Statistics Canada.
• Upcoming data releases include CPI on July 16, 2026, and GDP on July 31, 2026, from Statistics Canada.

The Data

OTTAWA — Canada’s inflation rate held steady at 2.6% in May 2026, according to Statistics Canada, as the economy continues to navigate elevated costs for services and housing. The reading matches April’s figure and remains above the Bank of Canada’s 2% target.

Core inflation measures, which strip out volatile items like food and energy, are still running above the headline rate. Services inflation, particularly in rents and mortgage interest costs, is keeping overall price pressures elevated. Goods inflation is easing, but not enough to bring the headline number down quickly.

The Bank of Canada held its key interest rate at 3.25% at its last meeting, according to the Bank of Canada. The central bank’s next rate decision is set for July 10, 2026. Policymakers have signaled they are watching inflation and wage data closely before making further moves.

Canada’s GDP grew at an annualized rate of 1.7% in the first quarter of 2026, Statistics Canada reported. The housing market has stabilized, and strong energy exports are a key driver of the expansion. For all of 2025, the economy grew 1.5%.

Labour market data for May 2026 was not included in this report. Analysts will be watching for employment figures ahead of the next Bank of Canada decision.

Housing and Energy Drive the Economy

The Canadian economy is getting a boost from two distinct sectors: housing and energy. The housing market has stabilized after a period of adjustment, providing support to consumer confidence and construction activity.

Energy exports remain strong, helping to lift GDP growth. This dual driver is a key reason why Canada’s economy is growing at a modest but steady pace, even as inflation stays above the central bank’s comfort zone.

What This Means

For Canadian households, inflation at 2.6% means the cost of living is still rising faster than the Bank of Canada’s target. Mortgage rates remain high with the policy rate at 3.25%, putting pressure on homeowners and renters alike. Wage growth is not keeping up with the full cost of services and shelter.

For businesses, borrowing costs are elevated, which can slow investment and expansion plans. Input prices are still rising, especially in services and construction. Firms with exposure to energy exports, however, are benefiting from strong global demand.

Outlook

Markets are watching the next two major data releases: CPI on July 16, 2026, and GDP on July 31, 2026, both from Statistics Canada. The Bank of Canada’s next rate decision on July 10, 2026, will be a key event for the outlook.

Analysts expect inflation to remain sticky in the near term, with the central bank likely to hold rates steady until there is clearer evidence that price pressures are easing. The risks include a slowdown in global energy demand or a sudden shift in the housing market.

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Data sourced from Statistics Canada (statcan.gc.ca) and Bank of Canada (bankofcanada.ca). Analysis by Economic Pulse Data Team.

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Edited by Editorial Desk. Fact-checked by Editorial Desk. This is analysis, not financial advice.