The Bank of Canada keeps rates unchanged at 2.25% at the December 2025 meeting.

The Bank of Canada kept rates unchanged at 2.25%.

Key points from the statement:

• BoC held the policy rate at 2.25%, maintaining a steady stance as inflation remains near target and the economy continues to adjust to global trade disruptions.

• Global conditions remain mixed: major economies are resilient despite US trade protectionism, with strong US consumption and AI investment, firmer-than-expected euro-area growth, and continued weakness in China’s domestic demand.

• Canada’s Q3 GDP surprised to the upside at 2.6%, but this strength was driven by volatile trade flows; underlying domestic demand was flat, and overall GDP is expected to weaken in Q4.

• Labour market shows tentative improvement, with employment gains over three months and unemployment falling to 6.5%, though trade-sensitive sectors remain soft and hiring intentions subdued.

• Inflation remains near target, with CPI at 2.2% and core measures between 2½% and 3%; underlying inflation is assessed around 2½%, and near-term CPI will be noisy due to last year’s GST/HST holiday effects.

• Policy stance deemed appropriate, with the current rate viewed as the right level to keep inflation close to 2% amid structural trade adjustments; BoC remains ready to respond if the outlook deteriorates.

The rate has moved down from 5.0% since it’s first cut in June 2024. In October , the central back cut by 25 basis points to the current 2.25%. At the time the central bank concluded:

• BoC cut the policy rate by 25 bps to 2.25%, citing ongoing economic weakness and inflation expected to stay near the 2% target.

• US trade actions and uncertainty are significantly weighing on Canada, contributing to a 1.6% Q2 contraction, weak exports, and soft business investment.

• Labour market remains soft, with job losses concentrated in trade-sensitive sectors, a 7.1% unemployment rate, and slowing wage growth.

• Inflation is running slightly above expectations, with CPI at 2.4%, core measures sticky around 3%, but underlying pressures expected to ease.

• GDP growth outlook remains subdued, with projections of 1.2% in 2025, 1.1% in 2026, and 1.6% in 2027, as excess capacity persists and the economy works through trade-related structural damage.

Since then, the employment situation has shown increasing signs of life, while inflation remains above and below 3%.

The USDCAD was trading at 1.3848 just before the decision.