The Bank of Canada (BoC) announced Wednesday morning the interest rate will remain at 2.25 per cent.
The last interest rate decision of 2025 was widely expected from economists and experts, including Adam Pukalo, Portfolio Manager with Harbourfront Wealth Management.
"The market had about a 93.5% chance that the BoC would hold, and really that is the case." Pukalo said.
In a news release explaining factors contributing to the Board's decision to hold the interest rate, the Central Bank said Canada's Gross Domestic Product (GDP) increased 2.6 per cent in the third quarter due to "volatility in trade."
The Bank expects GDP to be weaker in the fourth quarter based on an expected decline in net exports, but expect growth to pick up again in 2026, "although uncertainty remains high and large swings in trade may continue to cause quarterly volatility."
The Central Bank also saw signs of improvement with labour market numbers with employment gains over the last three months and the unemployment rate at 6.5 per cent as of November. But it acknowledged "job markets in trade-sensitive sectors remain weak and economy-wide hiring intentions continue to be subdued."
The inflation rate cooled down to 2.2 per cent in October, the Bank said, as "gasoline prices fell and food prices rose more slowly."
While the Bank expects the inflation rate to be higher in the short term due to " the effects of last year’s GST/HST holiday on the prices of some goods and services", it also expects "ongoing economic slack to roughly offset cost pressures associated with the reconfiguration of trade, keeping CPI inflation close to the 2% target."
"If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. Uncertainty remains elevated. If the outlook changes, we are prepared to respond. " the Bank states.
"In other words, I think things have improved enough to the point where the Bank of Canada isn't looking to lower rates again. I would say that their easing cycle is likely over," Pukalo said.
With the interest rate maintaining the status quo towards the end of the year, Pukalo said it provides an opportunity for people to reflect and plan for the future.
"Markets have done well, TSX is up close to 25% this year. And I think now is the time to say, 'Okay, what has worked? What hasn't worked? Do I have my plan written down, whether it's for my farm transition or my farm expansion? What does retirement look like? I think there's all those types of questions that it's good to kind of reflect on the year and seek out advice if you need answers to some questions." he said.
The first interest rate decision of 2026 is scheduled for January 28 and the Monetary Policy Report will be released the same day.
