In this blog:
What Does the Bank of Canada do?
Eight times a year, the Bank of Canada (BOC) announces its benchmark lending rate based on an assessment of the Canadian economy. This rate directly impacts variable interest rate products, such as mortgages, loans, and lines of credit, as banks and lenders adjust their prime rates accordingly. Understanding these changes can help you make informed financial decisions. For more information, take a look at our blog post summarizing four of the most frequently asked questions regarding the BOC.
Below, we break down the latest announcement and what it means for you.
Were there any Changes to the Interest Rate?
Today the Bank of Canada held its key overnight rate at 2.25 percent, maintaining the course set in late October.
The central bank’s decision reflects its view that the current rate is “about the right level” for now — balancing between supporting economic activity and keeping inflation from rising too fast.
What Information did the Bank Share about the Economy?
Canadian Economy
- Canada reported a 2.6 percent GDP growth in the third quarter, largely a result of trade swings. It is expected to see growth in domestic demand in the fourth quarter, but will come with a decline in net exports weaking GDP.
- Improvements to the labour market have shown a steady climb for several months, bringing the unemployment rate down to 6.5 percent in November. Sectors reliant on trade remain cautious to hire with uncertainty about future swings.
- CPI inflation continues to hold near the target of 2 percent reporting at 2.2 percent in October. Gasoline prices are down and food price hikes are slowing down.
- In the near term, Canadians can still expect volatility, but economic momentum for growth further into 2026.
Global Economy
- Even with ongoing trade tensions, the word economy is showing signs of resilience.
- Growth in the United States is drive by strong household spending and significant investment in AI industries.
- No major changes to global financial conditions, oil prices or the Canadian dollar since the Bank’s October Monetary Policy Report. Global Stability reduces the need for Bank of Canada to react aggressively.
How does this Impact Me?
- Variable-rate loan holders will see no change to their payments because of today’s announcement.
- While the Bank of Canada does not appear to be preparing for a rate hike in the immediate future, they have not signaled for further rate cuts with underlying inflation still relatively high.
Will there be any Interest Rate Changes in the Near Future?
The first Bank of Canada rate announcement of the new year is scheduled on January 28, 2026. Governing Council aims to maintain inflation near the 2 percent target, and believes the current policy rate will achieve stability while the economy continues through elevated uncertainty.
