Published: Wednesday, January 28, 2026 · 3:28 PM | Updated: Wednesday, January 28, 2026 · 3:28 PM
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🗝️ Key Points
- Investing.com — The Bank of Canada maintained its benchmark interest rate at 2.25% on Wednesday, in-line with economist expectations, as the central bank chose stability while.
- While the third quarter showed robust expansion, growth likely stalled in the final months of 2025 due to trade-related disruptions.
- Despite these headwinds, inflation remains anchored near the central bank’s 2% target, recording a 2.1% average over the past year.
Investing.com — The Bank of Canada maintained its benchmark interest rate at 2.25% on Wednesday, in-line with economist expectations, as the central bank chose stability while the nation grapples with continually shifting trade dynamics and US protectionism. Central bank officials noted that while domestic demand shows signs of recovery, the broader economic outlook remains “vulnerable to unpredictable US trade policies and geopolitical risks.”
Global financial conditions have stayed largely accommodative, even as the Canadian dollar climbed above 72 cents following recent weakness in the greenback. Highlighting the precarious nature of the current environment, Governor Tiff Macklem noted in prepared remarks, “US trade policy remains unpredictable, and geopolitical risks are elevated.”
The Canadian economy faces a period of structural realignment as businesses reconfigure supply chains to bypass restrictive US tariffs. While the third quarter showed robust expansion, growth likely stalled in the final months of 2025 due to trade-related disruptions.
Despite these headwinds, inflation remains anchored near the central bank’s 2% target, recording a 2.1% average over the past year. Governor Macklem emphasized the limits of central banking in this climate, noting, “Monetary policy cannot compensate for the structural damage caused by tariffs, and it cannot target hard-hit sectors of the economy.”
Labor market data presents a mixed picture, with the unemployment rate holding at an elevated 6.8% despite recent hiring gains in the service sector. High youth unemployment and cautious corporate hiring plans suggest that the “excess supply” in the economy is currently offsetting price pressures from trade costs.
Looking forward, the bank projected modest GDP growth of 1.1% for 2026 and 1.5% for 2027, contingent on a successful navigation of the upcoming CUSMA review. Maintaining a cautious stance on future adjustments, Macklem remarked, “The Bank is committed to ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.”
CIBC economist Avery Shenfeld responded to the “well-telegraphed” rate announcement, reiterating projections of “no interest rate moves by the Bank in 2026,” but allowing that “odds of a further cut as more likely than a hike, given the potential minefield in trade negotiations ahead, and a starting point that still has significant economic slack.”
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