The Bank of Canada kept its target for the overnight rate unchanged at 2.25% on Wednesday, signaling a steady monetary policy stance amid global uncertainties and ongoing adjustment to US trade restrictions.
In a statement, the Bank said the outlook for the Canadian and global economies remains largely unchanged from its October Monetary Policy Report, but warned that unpredictable US trade policies and geopolitical risks could weigh on growth.
“Monetary policy is focused on keeping inflation close to the 2% target while helping the economy through this period of structural adjustment,” the Bank said, noting that the current policy rate remains appropriate, provided the economy evolves broadly in line with expectations.
The Bank expects modest economic growth in Canada, projecting GDP increases of 1.1% in 2026 and 1.5% in 2027, in line with its previous forecast. Domestic demand appears to be strengthening, supported by rising employment, although the unemployment rate remains elevated at 6.8%. Exports continue to face headwinds from US tariffs.
On inflation, the Bank noted that consumer prices rose 2.4% in December, largely due to base-year effects from last winter’s GST/HST holiday. Core inflation has eased from 3% in October to roughly 2.5% in December, and overall inflation in 2025 was 2.1%.
The Bank expects inflation to remain near its 2% target over the projection period.