As was widely expected, the Bank of Canada held its benchmark overnight interest rate steady at its current level of 2.25%.
It was the fifth consecutive time that Canada’s central bank chose to leave interest rates unchanged. The move was widely expected by economists and financial markets.
However, at a press conference following the latest interest rate decision, Bank of Canada Governor Tiff Macklem disputed that the country is in a recession.
While acknowledging that the Canadian economy is weak, Macklem said, “recession is not the word I would use.”
Most economists are saying that Canada is currently in a recession after the economy contracted for the past two quarters.
However, the Bank of Canada governor said he is not comfortable using the term recession, saying that the economy “is not clearly in recession.”
“There’s been a lot of volatility, month to month, quarter to quarter, but when you look through the bumps, I mean the economy hasn’t really grown in the last year, but it hasn’t shrunk either,” Macklem said following the latest interest rate decision.
Canada’s economy saw a contraction in gross domestic product (GDP) on an annualized basis in the last two consecutive quarters, albeit by small amounts.
In the fourth and final quarter of 2025, the economy shrank by 0.2%. In this year’s first quarter, the economy contracted by 0.1%.
Two consecutive quarters of economic contraction meets the definition of a recession. Still, Macklem tried to put a positive spin on the current situation.
“The first quarter was just barely negative after the decline in the fourth quarter last year,” he said. “If you look across industries, what you see is that, in the first quarter, more than half of industries actually grew, expanded on a year-over-year basis.”
The governor noted that while Canada’s oil exports are up, other exports, such as autos, are down, with the vehicle sector being one of many that is reliant on the U.S. market.
Macklem concluded his remarks by saying that the Bank of Canada continues to assess all factors impacting the economy and is “prepared to respond as needed.”
The Bank of Canada next decides on interest rates on July 15 of this year.
