The central bank believes this rate is well-positioned to guide the economy through its current transition while helping inflation stay close to its two per cent goal.
Despite the steady rate, officials still acknowledge that uncertainty is high. Ongoing trade tensions with the United States remain a major concern, especially as tariffs continue to hit several Canadian industries. Earlier in the fall, the central bank warned that these trade disputes could leave long-lasting damage that interest rate changes alone wouldn’t be able to repair. However, the economy has performed more strongly than many had predicted.
Recent numbers for GDP and job creation have both surpassed expectations. November’s unemployment rate dropped to 6.5 per cent, offering another sign that the economy continues to grow, even with obstacles. Inflation is hovering just above two per cent, and more stable, core inflation measures are sitting closer to three per cent.
Not all indicators are positive. Consumer spending and business investment remained sluggish in the third quarter. Economists expect some improvement later in the year, but overall growth is still likely to slow before picking up again in 2026. Uncertainty around the renewal of the North American free-trade agreement is also weighing on business confidence.
Part of the country’s resilience may be explained by revisions to past economic data. Statistics Canada recently updated its growth figures for 2022 through 2024, showing the economy was stronger than previously thought heading into the current period of trade conflict. That means demand and overall economic capacity were higher than expected before tariffs began to take a toll.
Another stabilising factor is that many sectors outside of steel, aluminium, autos and lumber continue to trade with the United States under relatively low tariff rates. This has helped limit the spillover effects that could have slowed the broader economy.
Despite these pockets of strength, many households are still feeling financial pressure. Surveys show that the cost of living remains the top concern for Canadians, with a significant share struggling to afford their regular grocery bills. Central bank officials recognise this strain but remind Canadians that falling prices across the board could signal deeper economic trouble. Broad declines in prices often lead businesses to delay hiring or cut wages, creating a cycle that’s difficult to escape.
For now, the Bank of Canada intends to support steady inflation and guide the economy through its current challenges. With stability expected next year and the possibility of stronger growth in 2026, officials hope rising wages and a firmer economy will eventually ease the affordability pressures Canadians are facing.
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