The Bank of Canada (BoC) announced today that it is holding its key interest rate steady at 2.25 per cent. This decision marks the second consecutive meeting where the central bank has opted to maintain the rate, following a series of cuts in 2025. The announcement comes amidst concerns about trade and Canada's economic outlook.
The decision to hold the rate was widely expected by economists, given that topline inflation rose to 2.4 per cent in December, which is close to the Bank of Canada's target rate of two per cent. However, some underlying numbers, such as rising grocery prices, are more concerning. Governor Tiff Macklem stated in December that the central bank believes inflation is likely to hold around its target this year but is prepared to respond if the outlook changes. The central bank is closely monitoring risks and remains committed to ensuring Canadians continue to have confidence in price stability.
The Bank of Canada's economic outlook projects modest growth in the near term as population growth slows and Canada adjusts to U. S. protectionism. The central bank expects the economy to have stalled in the final quarter of 2025 but anticipates a gradual recovery over the next two years. The upcoming review of the Canada-U. S.-Mexico agreement (CUSMA) introduces a key source of uncertainty.
The central bank expects the Canadian economy to grow by 1.1 per cent in 2026 and 1.5 per cent in 2027. While the Bank of Canada believes the current policy rate is appropriate, Macklem's remarks suggest that policymakers remain open to adjusting the rate depending on how economic data evolves. The next interest rate announcement is scheduled for March 18, 2026.
