Bank of Canada officials seemed unfazed by the surprise economic decline in Q1

OTTAWA — Officials at the Bank of Canada were seemingly unfazed by economic weakness to start the year as they debated where to take the policy interest rate earlier this month.

The central bank today released a summary of the deliberations that led its governing council to hold the policy rate steady at 2.25 per cent for a fifth consecutive time on June 10.

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Officials acknowledged in the summary that they were surprised the Canadian economy posted a slight contraction in the first quarter of the year. The Bank of Canada had forecast a 1.5 per cent annualized growth rate in real gross domestic product for the first three months of 2026.

But looking through some recent volatile data, governing council agreed that not a lot had changed in the economy since its decision in April.

The war in Iran and upcoming review of the North American free trade pact were still significant sources of uncertainty, but Statistics Canada data suggested there were early signs of an economic rebound starting in the second quarter.

Governing council noted that despite back-to-back declines in quarterly GDP, most industries were still growing in the first quarter of the year and other indicators pointed to resilience among Canadian households.

The summary of deliberations repeated governor Tiff Macklem’s assertion that the Canadian economy is “not clearly in a recession.”

The council agreed that kind of downturn would be marked by a deep, widespread and persistent decline in economic activity.

The Bank of Canada is widely expected to hold its benchmark interest rate steady again at its next decision on July 15, when it will also update its forecast for the economy in its quarterly monetary policy report.

This report by The Canadian Press was first published June 24, 2026.

Craig Lord, The Canadian Press