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The Bank of Canada held its overnight benchmark interest rate at 2.25 per cent on Wednesday.
The announcement comes after the Bank’s first monetary policy meeting of 2026, and marks the second straight hold to borrowing rates.
Following the announcement, the Bank of Canada released a statement detailing the economic conditions which led to Wednesday’s decision.
“The outlook for the global and Canadian economies is little changed relative to the projection in the October Monetary Policy Report (MPR). However, the outlook is vulnerable to unpredictable U.S. trade policies and geopolitical risks,” said the Bank of Canada.
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“U.S. trade restrictions and uncertainty continue to disrupt growth in Canada. After a strong third quarter, GDP growth in the fourth quarter likely stalled. Exports continue to be buffeted by U.S. tariffs, while domestic demand appears to be picking up. Employment has risen in recent months. Still, the unemployment rate remains elevated at 6.8 per cent and relatively few businesses say they plan to hire more workers.”
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Canada’s GDP, or Gross Domestic Product, showed the economy shrank 0.3 per cent in October, and the labour market showed signs of weakening in December, when the unemployment rate increased to 6.8 per cent from 6.5 per cent in November, according to Statistics Canada.
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Consumer inflation was last measured at 2.4 per cent in December, which is roughly in line with the Bank of Canada’s two per cent target.
“Despite mounting signs of the country’s weakening labour market, the Bank opted for the wait-and-see approach today [Wednesday]. It isn’t surprising — headline inflation may be within target thresholds, but when you look under the hood, some essential outliers, particularly where foods costs are concerned, are worrisome,” said financial expert Shannon Terrell at NerdWallet Canada in a written note.
“Stability matters for an economy being tugged in different directions by shifting trade relationships.”
Gov. Tiff Macklem at the central bank is scheduled to speak to the media at 10:30 a.m. eastern.
– More to come
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