- Decision
- Maintain
- Rate change
- 0 bps
- overnight rate
- 2.25%
The Bank of Canada kept its target for the overnight rate unchanged at 2.25 % on 10 December, holding the Bank Rate at 2.50 % and the deposit rate at 2.20 %, saying this level remains appropriate to keep inflation near the 2 % goal while supporting an economy adjusting to trade-related shocks. After three 25 bp cuts since January trimmed the policy rate from 3.00 %, the implementation framework is unchanged, preserving the 30 bp operating corridor. October CPI slowed to 2.2 %—near target for over a year—while core measures remain between 2½ % and 3 %, and the Bank still judges underlying inflation to be about 2½ %; economic slack is expected to offset tariff-driven cost pressures even as a temporary GST/HST base effect lifts near-term readings. GDP expanded an unexpectedly strong 2.6 % annualised in Q3 on volatile trade, but flat final domestic demand and an anticipated export pullback point to weak Q4 growth before activity strengthens in 2026; the labour market has improved with three months of job gains and unemployment down to 6.5 % in November, though trade-exposed sectors and hiring intentions remain subdued. Global financial conditions, oil prices and the CAD are broadly steady versus the October Monetary Policy Report, with major economies showing resilience to US protectionism—US growth buoyed by consumption and AI investment, a firmer euro area, and softer Chinese demand. The Governing Council reiterates it stands ready to adjust policy as needed and remains focused on anchoring inflation expectations.
Rate evolution
From June 2025 to September 2026, the Bank of Canada lowered its target for the overnight rate by 50 basis points to 2.25%, after holding at 2.75% through July 2025, cutting in September and October 2025, and then pausing through September 2026. The initial holds reflected high uncertainty over US tariffs and trade negotiations, while the cuts followed weakening exports and business investment, increased labour market slack and fading core inflation momentum, before the Bank said the overnight rate was about right if inflation stayed near 2% and activity evolved broadly as projected.
It held at 2.25% on June 10 and July 15, 2026, as uncertainty about US trade policy persisted and the conflict in the Middle East kept oil prices elevated, while the economy remained in excess supply even as growth picked up and broadened. On June 10, the Bank looked through a rise in headline inflation to 2.8% in April because core inflation had moved down to around 2% and there was limited evidence of broad-based pass-through, while warning it would not let higher energy prices become persistent inflation. By July 15, it judged the policy rate appropriate to sustain the recovery and return inflation to 2%, noting that second-quarter growth was estimated at 2.5%, consumer spending remained solid and export growth had resumed, while labour market conditions stayed soft and core inflation remained close to 2%. On September 2, the Bank again held the rate as the economy and inflation evolved broadly as forecast, noting that second-quarter gross domestic product rose 3.3% and the recovery broadened but excess supply persisted, while consumer price index inflation hovered around 3% mainly because of gasoline prices and core measures remained close to 2% in July, even as prolonged high oil prices and new tariffs increased upside inflation risks and made growth prospects more uncertain.