The Bank of Canada held its policy rate at 2.25% in December 2025, maintaining a steady stance as inflation stays near target and economic conditions remain mixed across sectors.

• Canada’s economy grew 2.6% QoQ in Q3, driven mostly by volatile trade flows, while final domestic demand was flat, underscoring uneven underlying momentum.
• GDP is expected to weaken in Q4, as net exports decline even as domestic demand improves slightly; growth is projected to pick up in 2026, though quarterly volatility may persist.
• The unemployment rate fell to 6.5% in November, with solid employment gains over the past three months, but trade-sensitive sectors remain weak and nationwide hiring intentions are still subdued.
• CPI inflation slowed to 2.2% YoY in October, with gasoline prices dragging the headline rate lower; food inflation also eased, keeping CPI near the 2% target for more than a year.
• Core inflation remains between 2.5% and 3%, and the Bank estimates underlying inflation at roughly 2.5%, consistent with ongoing but manageable price pressures.
• Near-term CPI is expected to rise temporarily due to last year’s GST/HST holiday effects, but the Bank anticipates that economic slack will offset trade-related cost pressures, keeping inflation close to target.
• Global conditions remain mixed, with resilient US consumption and AI-driven investment, stronger-than-expected euro area growth, and continued softness in China’s domestic demand; financial conditions, oil prices, and the Canadian dollar are little changed since October.
• The Bank indicated that the current rate is “about the right level” if the outlook unfolds as expected, but emphasized readiness to adjust policy should inflation or growth deviate materially.