The BoC kept the overnight rate unchanged at 2.25% today, in line with expectations. The most notable element of the statement was the Governing Council’s assessment that, if inflation and economic activity evolve broadly as projected in October, the current policy rate is “about the right level.” This marks a clear signal that the easing cycle has effectively ended and that the bank has entered a long period of steady policy barring major surprises.
The statement acknowledged mixed growth dynamics heading into year-end. The Bank expects final domestic demand to expand in Q4, but weakness in net exports will leave overall GDP “likely weak.” Growth is projected to firm in 2026, though policymakers warned that uncertainty remains elevated and that swings in trade flows could continue to create quarter-to-quarter volatility.
Employment has posted solid gains over the past three months and the unemployment rate declined to 6.5% in November. However, job markets in trade-sensitive sectors “remain weak,” and economy-wide hiring intentions are still “subdued”—reflecting the broader drag from structural trade reconfiguration.
Despite these pressures, BoC expects the ongoing economic slack to counterbalance cost increases associated with shifting trade patterns. As a result, CPI inflation is still anticipated to stay close to the 2% target, providing the BoC with scope to maintain a steady hand for the foreseeable future.
