Key Interest Rate Stays At 2.25%

While some may have held out hope for another rate cut following the last reduction on October 29, which lowered the rate by 25 basis points, today’s announcement has put those expectations to rest. The BoC confirmed that it is maintaining the rate at 2.25%.

In their statement, the Bank emphasised, “If inflation and economic activity evolve broadly in line with the October projection, the Governing Council sees the current policy rate as appropriate for keeping inflation close to 2% while supporting the economy during this period of structural adjustment.”

Experts from leading financial institutions in the country believe that the likelihood of any further cuts in 2026 is minimal, provided the economy follows the BoC’s predicted path, which assumes inflation stabilises at around 2% in the coming year. However, BoC Governor Tiff Macklem cautioned that the situation is subject to change, asserting that the Bank would be ready to act if the economic outlook shifts. “If the (inflation) outlook changes, we are prepared to respond,” he stated.

Macklem explained that, despite significant challenges faced by the steel, aluminium, auto, and lumber sectors due to increased U.S. tariffs, the overall economy remains resilient. A recent Labour Force Survey indicated a third consecutive job gain of 181,000 since September, and GDP figures for the third quarter were also unexpectedly strong.

This raises questions for Canadians: could these optimistic forecasts, along with the Bank’s growing positive outlook, lead to consideration of rate hikes rather than cuts in the future?

Answer: If the economy continues to strengthen and the data consistently surpass the Bank’s forecasts, then a rate hike could become a possibility. However, no one is willing to make that commitment at this stage.