Decision marks the end of a tumultuous 2025 for the Canadian economy
The Bank of Canada announced today that it will hold its benchmark interest rate steady at 2.25 per cent.
The decision follows a cut of 25 basis points at the BoC's last decision in October. Economic trends have shown signs of improvement since then and a hold was widely predictied by economists
"Canada’s economy grew by a surprisingly strong 2.6% in the third quarter, even as final domestic demand was flat. The increase in GDP largely reflected volatility in trade," a press release announcing the decision reads. "The Bank expects final domestic demand will grow in the fourth quarter, but with an anticipated decline in net exports, GDP will likely be weak. Growth is forecast to pick up in 2026, although uncertainty remains high and large swings in trade may continue to cause quarterly volatility.
November employment data marked another month of positive surprises and the third consecutive month where the Canadian economy added jobs. Unemployment has now fallen to 6.5 per cent and even youth unemployment has come down slightly, though it remains in double digits.
Headline inflation data from October shows a small degree of cooling, at 2.2 per cent down from 2.4 per cent in September. Much of that drop was driven by gas prices, as well as a significant drop in grocery inflation, which remains relatively high at 3.4 per cent.
"If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment," the release reads. "Uncertainty remains elevated. If the outlook changes, we are prepared to respond."
