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December 10, 2025BANK OF CANADA MONETARY POLICY The Bank of Canada maintained its target for the overnight rate at 2.25%, with the Bank rate at 2.50% and the deposit rate at 2.20%.
The global economy has been resilient, but the impact of US tariffs have caused uncertainty to remain elevated. US growth is supported by strong consumption and an increase in AI investment. The US government shutdown has caused volatility in quarterly growth and a delay in economic data release. Euro area economic growth has been stronger than expected supported by the service sector. China’s economy has been impacted by soft domestic demand and more weakness in the housing market. Global financial conditions are roughly the same since the Bank’s October Monetary Policy Report.
In Canada, GDP grew by 2.6% in the third quarter even as domestic demand was flat and largely reflected the volatility in trade. The Bank expects domestic demand to grow in the fourth quarter and a decline in net exports, resulting in weak GDP. In 2026, growth is expected to pick up, but quarterly volatility due to trade and uncertainty will remain.
Employment growth has been stronger in the past three months, and unemployment rate has declined to 6.5% in November. Even though there are signs of the labour market improvement, job market in trade-sensitive sectors remains weak and hiring intentions remain subdued.
CPI inflation slowed to 2.2% in October as the gasoline prices fell and food price inflation rose more slowly. Near term inflation is likely to be higher with effects of last year’s GST/HST holiday. The Bank expects ongoing economic slack to offset cost pressures associated with trade, keeping CPI inflation close to the 2% target.
The Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. If the outlook changes, they are prepared to respond and will be assessing incoming data carefully relative to the Bank’s forecast.
The structural damage caused by the trade conflict reduces the capacity of the economy and adds costs. This limits the role that monetary policy can play to boost demand while maintaining low inflation. The Bank is focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.
The next scheduled date for announcing the overnight rate target is January 28, 2026. The Bank’s next Monetary Policy Report will be released at the same time.
Source: Monetary Policy press release; Monetary Policy press conference;
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