The Bank of Canada announced today that it’s keeping its key interest rate unchanged at 2.25%. This marks the second consecutive hold after a series of cuts throughout 2025.
The Decision
Governor Tiff Macklem and the Governing Council determined that the current rate is appropriate given the economic outlook. However, they emphasized that “heightened uncertainty” makes it difficult to predict what comes next.
The Bank Rate sits at 2.5% and the deposit rate at 2.20%.
Why Hold Steady?
Inflation is on target. Core inflation has cooled from 3% in October to around 2.5% in December. The Bank expects inflation to stay close to its 2% target going forward.
The economy is adjusting. Canada continues to adapt to U.S. tariffs and shifting global trade conditions. Growth is expected to be modest—1.1% in 2026 and 1.5% in 2027.
Trade uncertainty looms large. The upcoming review of the Canada-U.S.-Mexico Agreement (CUSMA) is a major wildcard. Until there’s more clarity on trade relations, the Bank is taking a wait-and-see approach.
What About the December Inflation Bump?
CPI inflation rose to 2.4% in December, but the Bank noted this was largely due to base-year effects from last winter’s GST/HST holiday. When you strip out tax changes, inflation has actually been slowing since September.
What's Next?
Most economists expect the Bank of Canada to stay on the sidelines through much of 2026. The next rate announcement is scheduled for March 18, 2026.
Macklem made clear that if conditions change, the Bank is ready to act—in either direction. For now, stability is the name of the game as Canada navigates an uncertain trade environment.
What This Means for You
If you have a variable-rate mortgage, your payments stay the same for now. If you’re on a fixed rate, this hold gives you more predictability as you plan ahead. For those looking to buy, rates are expected to remain relatively stable in the near term.
