All 33 economists in a recent poll expect the Bank of Canada to hold rates at 2.25%
Markets are betting that the era of aggressive Bank of Canada rate cuts is over—for now.
Economists expect the central bank to hold its policy rate at 2.25 percent at this week’s decision and then stay on the sidelines as earlier cuts work through the economy.
According to The Canadian Press, financial markets recently put the odds of a hold at about 93 percent, helped by stronger‑than‑expected job gains and a 2.6 percent annualized jump in third‑quarter real GDP.
The Bank of Canada has already cut by a full percentage point this year, delivering four quarter‑point reductions in January, March, September and October.
Reuters said those moves add up to 275 basis points of easing, one of the most aggressive cutting cycles among G10 central banks, before policymakers signalled in October that they were likely done unless the data shift sharply.
That signal is shaping the outlook.
Reuters reported that all 33 economists in a December poll expect the overnight rate to stay at 2.25 percent at the upcoming meeting, and a majority see no change at least until 2027.
As per The Canadian Press, Desjardins deputy chief economist Randall Bartlett expects the Bank of Canada to hold rates at the December meeting and remain on pause throughout 2026.
For investors, that points to a long stretch of low but stable rates backed by two key conditions: contained inflation and steady, if unspectacular, growth.
Reuters said inflation is easing and sitting firmly within the Bank of Canada’s target range, while the economy is still expanding at a solid pace despite US tariffs, with government spending helping to support the latest growth figures.
The central bank has had to manage the tariff shock without tipping into either a hard landing or a burst of inflation.
The Canadian Press reported that for much of the year, the Bank of Canada dropped its usual “central” forecast and instead offered scenario‑based projections tied to different US trade outcomes.
Governor Tiff Macklem repeatedly warned that US tariffs and Canada’s retaliatory measures could both slow the economy and push prices higher, and officials later acknowledged that core inflation measures were being distorted by tariff effects and policy changes such as removing the consumer carbon price.
According to The Canadian Press, Bartlett described the bank as facing a potential stagflationary shock—weak growth with higher inflation—and said it acted “prudently” by waiting through the spring and summer before resuming cuts in the fall.
After its second consecutive cut in October, the bank returned to formal forecasting with a call for just 0.75 percent growth in the second half of 2025 and only a modest recovery beyond that.
On housing, the transmission of policy is starting to show up more clearly.
Reuters said that despite “massive” rate cuts, national home prices are down about 3.2 percent this year but are expected to edge higher—by 1.8 percent next year and 3.5 percent in 2027—while most analysts in a Reuters survey see affordability improving for first‑time buyers over the coming year.
Canadian home sales picked up in October, and Reuters reported that lower borrowing costs appear to be reviving activity in the interest‑rate‑sensitive housing market, even if further help from the central bank will likely be limited if rates stay on hold.
According to Reuters, RBC assistant chief economist Robert Hogue said the Bank of Canada’s September and October cuts improved affordability by lowering ownership costs just as home values moderated in parts of the country, and argued that these rate reductions will likely pull more buyers back into the market and unlock pent‑up demand.
Fiscal policy is expected to do more of the heavy lifting from here.
Reuters reported that Prime Minister Mark Carney’s first federal budget set out $280bn in total investment over five years, including $25bn dedicated to housing supply.
A strong majority of analysts in that survey called the housing measures a step in the right direction, though some said the funding is still too modest to materially ease the “stressed economics” of new market housing supply in major centres.
Looking ahead, The Canadian Press said Bartlett will be watching how the Bank of Canada adjusts its inflation metrics and mandate ahead of the 2026 renewal, after a year in which tariffs and policy changes added noise to core inflation readings.
