Bank of Canada keeps interest rate at 2.25%
FILE: Bank of Canada
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The Bank of Canada kept its key lending rate steady Wednesday at 2.25 per cent, highlighting the resilience of the economy despite tariffs imposed by US President Donald Trump.
Canadian economic activity rebounded in the third quarter, growing 2.6 per cent, while employment rose in November for the third consecutive month.
The central bank said it expects “weak” GDP growth in the fourth quarter, given the anticipated decline in net exports.
“Growth is forecast to pick up in 2026, although uncertainty remains high and large swings in trade may continue to cause quarterly volatility,” the bank said in a statement.
In recent months, Canada has faced tariffs ranging from 25 to 50 per cent on some of its exports to the United States, particularly in critical sectors such as steel, cars and lumber.
Trump abruptly halted trade negotiations with Canada in late October and they have not resumed.
Amid the “elevated” uncertainty, Bank of Canada said it was “prepared to respond” if the outlook changes.
“There is… uncertainty about how the Canadian economy will adjust to higher tariffs,” the bank’s governor, Tiff Macklem, told a press conference.
While Canada’s economic sectors are “proving resilient” overall, trade and GDP volatility make it more difficult to assess the underlying momentum of the economy.”
Macklem also said the bank expects “some choppiness in headline inflation” in the coming months, with the figure being pushed “temporarily higher in the near term.”
In October, consumer prices showed a decline to 2.2 per cent, close to the Bank of Canada’s target of 2.0 per cent.
The Bank of Canada is set to announce its next decision on the key interest rate on January 28.
AFP
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