The Bank of Canada holds interest rates at 2.25%

The Bank of Canada held its benchmark lending rate unchanged at 2.25 per cent in the final monetary policy update for 2025.

Most economists expected the central bank to announce a hold to interest rates, after recent reports on the economy were somewhat positive.

This included recent gauges on economic output, or gross domestic product; consumer inflation, or the consumer price index; and the Labour Turnover survey showing unemployment ticking down for the second straight month.

At least one economist thinks that if the bank makes any changes in the near future, it won’t be a cut, but actually a hike in the second half of 2026.

“No change is priced until markets begin to seriously toy with a hike by summer into fall,” said Derek Holt, vice-president and head of capital markets economics at Bank of Nova Scotia, in a statement.

“A great deal of uncertainty lies ahead into 2026, which cuts in both directions to our (Bank of Nova Scotia’s) expectations.”

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Governing members at the Bank of Canada have opted to cut interest rates four times this year, including at the September and October meetings. That was after holding rates for three straight meetings in April, June and July, and cutting rates in January and March.

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Following the October rate cut, Bank of Canada governor Tiff Macklem said that at 2.25 per cent, the current rate is “at about the right level.”

Monetary policy is updated eight times per year based on the Bank of Canada’s mandate to “promote the economic and financial welfare of Canada.”

Keeping rates unchanged at a monetary policy meeting suggests borrowing costs in Canada are right around where they should be, given the current state of the economy.

In a statement after the announcement, the Bank of Canada said once again that the rate is “at about the right level,” but the uncertain outlook means they remain cautious into 2026.

“Governing Council sees the current policy rate at about the right level to keep inflation close to two per cent, while helping the economy through this period of structural adjustment,” said the Bank of Canada in a statement.

“Uncertainty remains elevated. If the outlook changes, we are prepared to respond. The Bank is focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.”

Macklem is scheduled to attend a press conference at 10:30 a.m. eastern time, which could offer some further insight into what led to Wednesday’s decision, and what could be on the horizon for 2026 from the Bank.

“A rate hold is the only move that makes sense in response to recent opposing economic forces,” said Shannon Terrell, a financial expert at NerdWallet Canada.

“There’s no reason to do anything with the overnight rate other than to leave well enough alone. “