Toronto 
The Bank of Canada has left its target for the overnight rate unchanged at 2.25 percent, with the Bank Rate at 2.5 percent and the deposit rate at 2.20 percent. The decision comes amid what the Bank describes as continued global resilience to U.S. trade protectionism alongside persistent uncertainty.
Credit: Bank of Canada
The Bank noted that U.S. growth is being driven by consumer spending and increased investment in artificial intelligence. It also reported that the recent U.S. government shutdown generated volatility in quarterly growth and delayed economic data releases.
Tariffs are contributing to upward pressure on U.S. inflation. Economic performance in the euro area has exceeded expectations, supported by a strong services sector, while China continues to face weak domestic demand and further deterioration in its housing market. Oil prices, global financial conditions and the Canadian dollar are largely unchanged from the October Monetary Policy Report.
Canada’s GDP rose 2.6 percent in the third quarter, a result the Bank characterized as “surprisingly strong,” though final domestic demand remained flat. Officials expect domestic demand to increase in the fourth quarter, while weaker net exports will likely restrain overall growth. Projections point to stronger expansion in 2026, though the Bank cautioned that “large swings in trade may continue to cause quarterly volatility.”
Labour market indicators show modest progress. Employment rose over the past three months, and the unemployment rate fell to 6.5 percent in November, yet hiring in trade-sensitive sectors remains limited.
CPI inflation slowed to 2.2 percent in October, influenced by lower gasoline prices and slower food price growth. Core inflation measures remain between 2.5 and 3 percent. The Bank estimates underlying inflation at roughly 2.5 percent and expects short-term increases due to last year’s GST/HST holiday. It stated that economic slack should offset cost pressures associated with shifts in global trade.
“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,” the statement said. The Bank added that it is prepared to adjust its stance if conditions change.
The next rate announcement and Monetary Policy Report are scheduled for January 28, 2026.
