How the Bank of Canada Sets Interest Rates: Process, Schedule and Target

How the Bank of Canada decides its policy rate: the 2% inflation target, the eight fixed announcement dates, the Governing Council process and the 2026 renewal.

Key takeaways

The Bank of Canada sets its target for the overnight rate on eight fixed dates a year, four of them with a Monetary Policy Report.
Its goal is total CPI inflation at 2%, the midpoint of a 1% to 3% range, over a six to eight quarter horizon.
The current inflation-target agreement expires December 31, 2026, and the Bank expects to publish the renewed agreement before then.

The Bank of Canada sets one number, its target for the overnight rate, and it does so on eight fixed dates a year. Every decision serves one goal agreed with the federal government: keeping total CPI inflation at 2%, the midpoint of a 1% to 3% range. Once you know how the process runs, each announcement is easier to read.

What the policy rate is

The policy interest rate is the Bank’s target for the overnight rate. That is the rate at which major financial institutions borrow and lend one-day funds among themselves. The Bank moves it to steer short-term interest rates across the economy, and from there borrowing costs for households and businesses.

Each announcement sets three numbers. On September 2, 2026, the Bank kept the target at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. The Bank Rate sits a quarter point above the target and the deposit rate sits just below it.

Commercial lenders set their prime rates off the policy rate, which is how a decision reaches variable-rate mortgages, lines of credit and floating-rate business loans.

The target: 2% inside a 1% to 3% band

Canada adopted inflation targeting in 1991. The target is set in a joint agreement between the Bank and the Government of Canada that is renewed every five years. The current agreement, announced December 13, 2021, runs to December 31, 2026. It keeps “the 2 percent mid-point of the 1 to 3 percent inflation-control range” and adds that the Bank will “actively seek the maximum sustainable level of employment when conditions warrant.”

The target applies to total CPI. The Bank does not try to hit 2% every month. Its stated horizon is six to eight quarters, which it describes as the time it usually takes for a policy change to work through the economy and have its full effect on inflation.

That horizon explains decisions that can look odd from the outside. In its September 2, 2026 statement, the Bank said headline CPI had been hovering around 3%, driven mainly by gasoline. Excluding gasoline, inflation was 2.2% in July and core measures were close to 2%. The Bank held its rate rather than raising it.

The 2026 renewal

Because the 2021 agreement ends on December 31, 2026, the Bank and the government are renewing it this year for another five-year period. The Bank has held stakeholder consultations, which are now concluded, and has published research to support the review. It has said it will publish a background document summarizing that research, along with the renewed agreement, before the end of 2026.

The renewal is the one moment every five years when the target itself, the range around it or the employment language can change. Until a new agreement is published, the 2% midpoint and the 1% to 3% range remain the rule.

The schedule: eight fixed dates a year

The Bank publishes each year’s dates well in advance. The 2026 schedule was released in August 2025. Every announcement comes at 9:45 a.m. ET. Four of the eight are paired with the Monetary Policy Report (MPR), the Bank’s full economic projection. The other four are shorter statements.

2026 announcement date	Monetary Policy Report
January 28	Yes
March 18	No
April 29	Yes
June 10	No
July 15	Yes
September 2	No
October 28	Yes
December 9	No

The Bank also publishes its Business Outlook Survey and Canadian Survey of Consumer Expectations four times a year. In 2026 those dates are January 19, April 20, July 6 and October 19, each nine days before an MPR decision.

For a record of how each 2026 decision went and what the Bank cited, see our piece on Bank of Canada rate decisions in 2026 and what they mean for small caps.

Inside the decision

Rate decisions belong to the Governing Council: the Governor, the Senior Deputy Governor and four Deputy Governors. For the September 2, 2026 decision, that group was Governor Tiff Macklem, Senior Deputy Governor Carolyn Rogers and Deputy Governors Toni Gravelle, Nicolas Vincent, Michelle Alexopoulos and Marc-André Gosselin.

The process runs about a week:

About a week before the announcement, senior staff present their final analysis, their read of the risks and their policy recommendations.
Governing Council members enter a communications blackout and make no public comment on policy.
The Council meets several times over the rest of that week and early the following week to work through differences of view.
The decision is reached by consensus, not by a recorded vote. A press release is then drafted and approved.

Since 2023, the Bank has published a summary of Governing Council deliberations roughly two weeks after each decision. The summary for September 2, 2026 came out on September 16. It covered energy prices tied to conflict in the Middle East, new US tariffs on about 5% of Canadian exports, and an unemployment rate of about 6.5%.

The math: from peak to hold

Date	Target for the overnight rate	Bank Rate
July 12, 2023	5.00% (increase)	5.25%
September 2, 2026	2.25% (hold)	2.50%

Between July 12, 2023 and September 2, 2026, the policy rate came down 2.75 percentage points, from 5% to 2.25%. On a $500,000 loan whose rate moves one for one with the policy rate, a 2.75-point drop works out to $13,750 less interest a year ($500,000 x 0.0275). The same arithmetic runs in reverse when the Bank raises rates.

What to watch

October 19, 2026: Business Outlook Survey and Canadian Survey of Consumer Expectations.
October 28, 2026: rate announcement and October Monetary Policy Report.
December 9, 2026: the final rate announcement of the year.
The renewed monetary policy framework agreement, which the Bank expects to publish before the current one expires on December 31, 2026.
Summaries of Governing Council deliberations, about two weeks after each decision.
Monthly CPI releases from Statistics Canada, which show where total CPI sits against the 2% target.

Sources

Frequently asked questions

How often does the Bank of Canada announce interest rate decisions?

The Bank of Canada announces its policy rate on eight fixed dates each year at 9:45 a.m. ET. In 2026 the dates are January 28, March 18, April 29, June 10, July 15, September 2, October 28 and December 9. The January, April, July and October decisions come with the Monetary Policy Report.

What is the Bank of Canada inflation target?

The Bank aims to keep total CPI inflation at 2%, the midpoint of a 1% to 3% range, over the medium term. The target is set in a joint agreement with the federal government that is renewed every five years. The current agreement, announced December 13, 2021, runs to December 31, 2026.

Who decides the Bank of Canada policy rate?

The Governing Council decides: the Governor, the Senior Deputy Governor and four Deputy Governors. Members observe a communications blackout in the final week, meet several times, and reach the decision by consensus rather than a vote. Since 2023 the Bank has published a summary of deliberations about two weeks after each decision.