BoC holds rates at 2.25%, flags rising economic uncertainty

The Bank of Canada maintained its benchmark rate at 2.25%, in line with expectations, stating that its outlook for GDP and inflation has remained basically unchanged since October, albeit uncertainty continues to weigh on it. Trade tensions and tariffs are likely to hamper economic activity until the end of 2025, with growth forecast at 1.1% in 2026 and 1.5% in 2027.

The BoC expects inflation to ease further as temporary base effects from last year’s GST/HST holiday fade, allowing inflation to stay near the 2% target as excess supply offsets tariff-related cost pressures.

Policymakers said elevated uncertainty makes it difficult to predict the timing or direction of the next rate move, reinforcing a data-dependent approach. While the decision was widely expected, the Bank highlighted that geopolitical developments could impact the outlook in 2026.