Bank of Canada Holds Key Interest Rate - Dec 10, 2025

This morning, the Bank of Canada announced that they will be holding the key interest rate. The prime rate remains at 4.45%. As a result, there are no payment changes for variable-rate mortgage holders.

Major economies around the world are still doing fairly well, even with the U.S. putting up more trade barriers. Still, there’s a lot of uncertainty. In the United States, the economy is growing because people are spending a lot and companies are investing heavily in artificial intelligence. A recent U.S. government shutdown caused some ups and downs in their growth and delayed important economic reports. New tariffs are also pushing U.S. inflation slightly higher.

In Europe, the economy is doing better than expected, especially in the services sector. In China, growth is slowing because people aren’t spending as much and the housing market is struggling. Overall, global financial conditions, oil prices, and the Canadian dollar haven’t changed much since the Bank of Canada’s last major report.

Canada’s economy grew by a strong 2.6% in the third quarter, even though Canadians didn’t buy much more than before. Most of this growth came from changes in trade. The Bank of Canada expects Canadian spending to grow in the next quarter, but because exports are expected to fall, overall GDP growth will likely be weak. Growth is expected to improve in 2026, but there could still be big swings quarter to quarter.

Canada’s job market is showing some improvement. More people were hired over the past three months, and the unemployment rate dropped to 6.5% in November. However, jobs in industries affected by global trade are still weak, and overall hiring plans by businesses remain low.

Inflation slowed to 2.2% in October because gas prices went down and food prices didn’t rise as fast. Inflation has been close to the Bank of Canada’s 2% target for over a year, even though core inflation is still between 2.5% and 3%. The Bank thinks true underlying inflation is around 2.5%. In the short term, inflation might rise slightly because of last year’s GST/HST holiday affecting prices. But looking past that, the Bank expects the weaker economy to balance out higher costs from global trade changes, keeping inflation close to 2%.

If the economy and inflation follow the Bank’s expectations, the current interest rate is likely appropriate to keep inflation near 2% while supporting the economy through this transition. But because uncertainty is still high, the Bank is ready to adjust if things change. Their main goal is to make sure Canadians can trust that prices will stay stable, even during global disruptions.

The next interest rate decision will be on January 28, 2026.

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