Key Takeaways:
- The Bank of Canada (BoC) held its interest rate firm at 2.25% at its December 10 announcement
- The hold comes after the central bank cut its rate in October by 25 basis points
- TD Economist Marc Ercolao said the BoC is likely done with rate cuts for 2026, pending any upcoming economic turbulence
The Bank of Canada (BoC) just held its interest rate firm at 2.25%. The rate hold comes after the BoC cut its rate by 25 basis points in October.
At its December 10 rate announcement, Canada’s central bank said: "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."
“Interest rates have been lowered substantially over the last year and a half, and these cuts continue to work their way through the economy to support households and businesses, especially during a time of heightened economic volatility,” said TD Economist Marc Ercolao.
“The Bank of Canada has reinforced that it feels comfortable with the current level of interest rates in the economy.”
What a rate hold means for Canadians
The BoC’s lending rate is used as a benchmark by banks to set interest rates on financial products such as mortgages, personal loans, and business loans.
So, when the BoC cuts its lending rate, it can become cheaper to borrow money. And when the BoC’s lending rate goes up, it can become more expensive.
When the BoC holds its lending rate steady, not much changes for Canadians. For Canadians with both variable rate mortgages and fixed rate mortgages, things will remain status quo.
Rate cuts to come in 2026?
According to Ercolao, the BoC is likely to hold its interest rate steady at 2.25% throughout 2026. This projection, however, is contingent on the economy evolving in line with the central bank’s projections, notably inflation stabilizing at 2% by next year, he said.
“Should conditions change, further rate moves might be warranted,” Ercolao said. “Stay tuned for the Bank of Canada's next interest rate decision on January 28, 2026.”