Policy Rate Raised by 25 Basis Points to 2.5%: Inflation and Growth Outlook

This announcement covers a 25 basis point increase in the policy rate to 2.5%, the first since July 2023, along with the economic developments behind the decision. It outlines how the outlook for inflation has deteriorated and why the rate hike was considered necessary.

■ Key Economic Developments
- Inflation outlook deterioration: persisting conflict in the Middle East, higher global oil prices expected to remain elevated, impact on gas prices and business costs
- Improved growth outlook for Canada: mid-year growth pickup, exports, and business and government investment expected to support recovery
- Rationale for the rate increase: limiting the risk that higher energy prices spill over into generalized inflation

■ Remaining Uncertainty
- Fluidity of Middle East developments and Canada-US trade relations
- Impact of new U.S. tariffs and the extent to which energy costs feed into consumer prices

Those following central bank policy, energy markets, or the Canadian economy can use this to understand the reasoning behind the decision and the factors being monitored going forward. Review the full remarks to see the complete assessment presented.