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 and Canadian outlook is little changed form the October Monetary Policy report but is still vulnerable to unpredictable US trade policies and geopolitical risks. US inflation is pushed up by tariffs but is expected to fade gradually later this year. Euro area growth is supported by the service sector in addition to the support from fiscal policy. The Bank expects China’s GDP growth to gradually slow with weakening domestic demand offset by strengthening in exports.  Oil prices have been fluctuating, but they are expected to remain below October projections. Global growth is projected to average 3% over the projection horizon.

In Canada, GDP grew by about 1.7% in 2025 and was flat on a per person basis. Growth in potential output and GDP is pulled down by slower population growth. Swings in net trade and inventory investment resulted in volatile quarterly GDP growth in 2025. Canada is still adjusting to US protectionism as business investment strengthens gradually and support from fiscal policy. Economic growth is projected at 1.1% in 2026 and 1.5% in 2027, in line with the October Projections.

Employment growth has been stronger in the recent three months, and unemployment rate has remained elevated at 6.8% in December 2025. 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 picked up in December, boosted by base-year effects of last winter’s GST/HST holiday, however, inflation excluding tax measures has been slowing since September. Inflation was 2.1% in 2025 and the Bank expects inflation to stay close to the 2% target over the projection period, with trade-related cost pressures offset by excess supply.

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 next scheduled date for announcing the overnight rate target is March 18, 2026. The Bank’s next Monetary Policy Report will be released on April 29, 2026.

Source: Monetary Policy press release; Monetary Policy press conference; Monetary Policy Report, January 2026