Bank of Canada Holds Key Interest Rate - Jan 28, 2026

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.

Global Economic Outlook

The U.S. economy is growing faster than expected, supported by AI investment and strong consumer spending. While tariffs have raised U.S. inflation, their impact is expected to fade later this year. Europe’s growth is being supported by strong service industries and government spending. China’s economy is slowing as weaker domestic demand offsets strong exports. Overall, global growth is expected to average about 3%.

Global Financial Conditions

Financial conditions around the world remain supportive of economic growth. A weaker U.S. dollar has helped push the Canadian dollar above 72 cents, similar to its level in October. Oil prices have been moving up and down due to global political events but are expected to remain slightly lower than what was predicted in the October report.

Canada's Economic Situation

Trade restrictions and uncertainty with the U.S. continue to affect Canada’s economy. After strong growth in Q3, economic growth likely slowed in Q4. Canadian exports are still being hurt by U.S. tariffs, but spending within Canada is starting to improve.

Employment has increased in recent months, but the unemployment rate remains high at 6.8%. Many businesses are still hesitant to hire more workers.

Canada's Growth Outlook

Canada’s economic growth is expected to be modest as population growth slows and trade barriers continue. Consumer spending is expected to remain steady, business investment should gradually increase, and government spending will provide support. The Bank projects growth of 1.1% in 2026 and 1.5% in 2027, with uncertainty around the upcoming Canada-US-Mexico Agreement review.

Inflation and Monetary Policy

Inflation rose to 2.4% in December due to temporary tax-related effects, but underlying inflation has been slowing. Inflation is expected to stay close to the Bank’s 2% target. The Bank believes the current interest rate is appropriate but is closely monitoring risks and is prepared to act if economic conditions change.

The next interest rate decision will be on March 18, 2026.

Interest rates have dropped significantly from a year ago, and the market has changed a lot. I've been doing a lot of mortgage reviews lately and finding opportunities for clients to save thousands of dollars. If you'd like to see how much you could save, let's chat! Book an appointment with us here.