12/10/2025
đź“° Bank of Canada Holds Key Rate at 2.25% Amid Robust Data and Stable Inflation
The central bank’s decision to hold, which the market had pegged with 93.5 percent odds, follows two consecutive rate cuts earlier this fall. It signals that the Governing Council is comfortable with the current policy setting despite lingering global uncertainties.
In its statement, the Bank reiterated a key message from its October announcement, indicating that the current rate is sufficient for its mandate:
"If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2 per cent while helping the economy through this period of structural adjustment."
The decision comes after a string of surprisingly strong economic reports that bolstered the case for a pause. Most notably, October inflation dropped to 2.2 per cent, landing firmly within the Bank’s target range, and the Labour Force Survey revealed a third-straight surprise job gain, adding 181,000 net jobs since September.
The BoC noted that third-quarter annualized GDP growth, at 2.6 per cent, was "surprisingly strong." However, the Bank tempered this figure by pointing out that the growth "largely reflected volatility in trade," as final domestic demand was flat.
Looking ahead, the central bank forecasts a likely weak GDP reading for the fourth quarter due to an anticipated decline in net exports, but expects growth to pick up in 2026. This mixed data prompted BMO chief economist Douglas Porter to comment last week that the economic data has been "so firmly planted on the strong side that market chatter is now that the next move could be a hike (albeit well down the road)."
"Mortgage rates are no longer the villain in this story," Soper said, noting that borrowing costs have stabilized at a level that "will unlock demand" as buyers gain clarity.
The Bank of Canada's next scheduled interest rate announcement, which will also include the release of its quarterly Monetary Policy Report, is set for: Wednesday, January 28, 2026 (at 9:45 a.m. ET).
