The Bank of Canada (BoC) held its policy rate at 2.25%, in line with market expectations.
The opening statement noted that the Bank’s outlook for growth and inflation “has not changed significantly” since the October projection, but uncertainty about the outlook was a common theme. The ongoing uncertainty and tariffs are expected to continue to weigh on the Canadian economy with the economy stalling out to end 2025. The updated Monetary Policy report showed growth is expected to register 1.1% in 2026 and 1.5% in 2027.
The Bank expects that inflation will continue to moderate in the coming months. Base-year effects from last year’s GST/HST holiday will eventually drop out of the price calculation, and inflation should hold around the 2% target “over the projection as tariff-related cost pressures are offset by excess supply”.
Importantly the release noted that, “[w]hile Council judges the current policy rate is appropriated based on our outlook, the consensus was that elevated uncertainty makes it difficult to predict the timing or direction of the next change in the policy rate”.
Key Implications
Not much of a surprise here from the BoC as the data stream has essentially fallen in line with the Bank’s expectations. Inflation has continued to moderate (absent base-effects from the GST/HST holiday), and economic growth is generally in line with expectations, leaving the Bank to stay the course.
A widely expected hold, but the emphasis on uncertainty in the statement was prominent. The Bank emphasized the data dependent approach in the coming months as the CUSMA review and geopolitical events could shift the outlook in 2026. That said, our baseline outlook is relatively in line with the BoC – below-trend growth helping inflation continue to moderate. Under these conditions we expect the BoC to stay on the sidelines in the coming months.
, and economic growth is generally in line with expectations, leaving the Bank to stay the course.){kind=link}