Bank of Canada Holds Rates Amid Economic Uncertainty
Summary:
The Bank of Canada maintained its overnight rate at 2.25% in December 2025, citing high economic uncertainty. Policymakers were divided on whether the next move would be a rate cut or hike, emphasizing the unpredictable nature of global trade dynamics, particularly the U.S.-Mexico-Canada Agreement (USMCA). Quarterly GDP figures showed volatility, with soft economic growth expected in Q4. The central bank reiterated its readiness to adjust policy if inflation or economic activity shifts significantly.
What This Means for You:
- Monitor Rate Trends: Prepare for potential fluctuations in mortgage and loan rates, as the Bank of Canada’s next move remains uncertain.
- Assess Investment Risks: Businesses should evaluate the impact of trade policy instability on investments, particularly in North American markets.
- Plan for Economic Volatility: Consumers and businesses alike should anticipate continued GDP variability in the coming quarters.
- Stay Informed: Keep an eye on central bank announcements and economic indicators to navigate potential policy shifts effectively.
Original Post:
By Melissa Shin
(Bloomberg) — Bank of Canada officials agreed on holding the overnight rate at 2.25% earlier this month, but are unsure whether their next policy shift will be to lower rates again or to raise them.
In a summary of deliberations of their Dec. 10 decision, policymakers said the “high level of uncertainty” made it “difficult to predict when and in which direction the next change in the policy rate would be.”
The seven members of the central bank’s governing council discussed how the future of the U.S.-Mexico-Canada Agreement would affect the outlook. If the trade deal were to fall apart, it would be very damaging to the economy. But a resolution that “provided some stability in North American trade policy could spur on business investment,” the bank’s summary said.
The central bank reiterated that it’s prepared to respond if the outlook for economic activity or inflation changes significantly.
Policymakers also noted that quarterly gross domestic product figures had been volatile of late, “an indication of how challenging it will be to assess the underlying trends in the economy.”
They expected fourth-quarter GDP to be soft, with increases in consumption, housing activity and government spending offsetting weakness in business investment and net exports.
Initial GDP estimates released Tuesday showed a small expansion in November, following a 0.3% contraction in October, indicating that growth is likely to be negative in the quarter.
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Bank of Canada Bank of canada rate expectations bloomberg BoC BoC minutes summary of deliberations
Last modified: December 24, 2025
Extra Information:
Bank of Canada Official Website: For up-to-date policy announcements and economic analysis.
Bloomberg Canada: Offers broader insights into Canadian economic trends and global trade impacts.
People Also Ask About:
- What factors influence the Bank of Canada’s rate decisions? Economic growth, inflation, and global trade dynamics are key determinants.
- How does the USMCA affect Canada’s economy? It impacts trade stability, investment, and GDP growth in North America.
- What is the outlook for Canadian GDP in 2026? GDP growth is expected to remain volatile, influenced by domestic consumption and trade policies.
- How should businesses prepare for rate changes? Businesses should diversify investments and monitor central bank announcements closely.
Expert Opinion:
The Bank of Canada’s cautious stance highlights the delicate balancing act central banks face amid global economic uncertainty. Trade policy resolutions, particularly regarding the USMCA, will play a pivotal role in shaping Canada’s economic trajectory in the coming years. Businesses and consumers must remain agile to navigate potential disruptions and opportunities.
Key Terms:
- Bank of Canada rate decisions
- USMCA trade policy impact
- Canadian GDP volatility
- Economic uncertainty and central bank policy
- North American trade stability
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