Bank of Canada Holds Rates Steady Amid Trade Uncertainty

The Bank of Canada announced its latest monetary policy decision, opting to keep the policy interest rate unchanged at 2.25% as the Canadian economy navigates trade disruptions and structural changes.

Despite significant US tariffs on steel, aluminum, autos, and lumber, the Canadian economy has shown resilience, with economic growth revised upward for previous years and a stronger-than-expected rebound in the third quarter of 2025. However, trade volatility and uncertainty over future US trade policy continue to cast a shadow over business investment and economic outlooks. Following earlier interest rate cuts, the Bank signaled confidence that the current rate is appropriate to maintain inflation near its 2% target, even as inflation briefly edged higher due to temporary tax changes and cost pressures from trade reconfiguration. The labor market has started to recover, with falling unemployment and stable jobs in previously impacted sectors, though overall hiring intentions remain cautious. Ongoing fiscal measures, including increased government spending and investments, are expected to gradually support both demand and supply, but their full economic impact will take time to materialize.

In the face of elevated uncertainty and potential further shocks, the Bank remains prepared to adjust its policies as needed, underscoring its commitment to price stability during this period of global economic adjustment.