Rate Decision
2.25%
Policy Interest Rate
- Bank Rate: 2.50%
- Deposit Rate: 2.20%
Why this Decision
- Inflation near 2% target
- Economic growth remains modest
- Labour market has slack
- Trade & global risks elevated
Inflation Snapshot
2.4%
December 2025 CPI
- Temporary tax effects
- Core inflation easing
- Expected to stay near target
Economic Outlook
- GDP 2026: 1.1%
- GDP 2027: 1.5%
- Unemployment: ~6.8%
- Hiring remains cautious
Key Risks
- US trade & tariff uncertainty
- Geopolitical instability
- Upcoming CUSMA review
What It Means
- Borrowing costs likely stable
- No immediate mortgage rate shift
- Businesses remain cautious
Rate Decision
In its January 28, 2026 announcement, the Bank of Canada chose to hold its policy interest rate at 2.25%, signalling that current monetary conditions remain appropriate as inflation continues to move closer to the Bank’s 2% target. While headline inflation ticked up to 2.4% in December, the Bank noted that much of this increase was driven by temporary factors. Core inflation measures have continued to ease, reinforcing confidence that price pressures are stabilizing.
Why the Bank Is Proceeding Cautiously
Economic growth in Canada remains modest, with GDP expected to grow by approximately 1.1% in 2026. The labour market still shows signs of slack, and businesses remain cautious amid ongoing trade and geopolitical uncertainty. In particular, uncertainty surrounding US trade policy and the upcoming review of the Canada–United States–Mexico Agreement (CUSMA) is weighing on investment decisions and export performance.
What This Means for Borrowers and Homeowners
For households and businesses, today’s decision suggests that borrowing costs are likely to remain stable in the near term. Variable mortgage rates and lines of credit are closely tied to the Bank’s policy rate, meaning no immediate change is expected unless economic conditions shift. Fixed mortgage rates, which are influenced more by bond yields than the policy rate, may still fluctuate — but today’s announcement reduces
near-term uncertainty for buyers and homeowners planning ahead.
Looking Ahead
The Bank of Canada emphasized that it will continue to monitor inflation, economic growth, and global developments closely. Future rate decisions will depend on how these factors evolve over the coming months.
