The Bank of Canada stood pat in its final interest rate announcement of the year on Wednesday, saying that while uncertainty remains high, major global economies are showing resilience to US trade protectionism.
The Bank’s key overnight lending rate remains at 2.25%, with most analysts and economists expecting no change.
If inflation and economic activity evolve broadly in line with October projections, the Bank said it sees the current policy rate at “about the right level” to keep inflation close to 2% while helping the economy through the current period of structural adjustment. However, it warned that uncertainty remains elevated.
“If the outlook changes, we are prepared to respond,” the Bank said in its accompanying note.
Canada’s economy grew by a surprisingly strong 2.6% in the third quarter, the Bank said. And while fourth-quarter growth is expected to be weak, things are expected to pick back up again in 2026. Meanwhile, employment has shown solid gains in the past three months, and the unemployment rate declined to 6.5% in November. Nevertheless, job markets in trade-sensitive sectors remain weak and economy-wide hiring intentions continue to be subdued, the Bank cautioned.
The Canadian inflation rate slowed to 2.2% in October, as gasoline prices fell and food prices rose more slowly. CPI inflation has been close to the 2% target for more than a year, while measures of core inflation remain in the range of 2½% to 3%.
The Bank will make its next rate announcement Jan. 28, with expectations for rates to remain on hold through the early part of the New Year.
Farmers will be keeping a close eye on interest rates, especially as national farm debt jumped 14% from the previous year in 2024 – the largest annual increase since 1981.
In fact, interest expenses led the gain in total national farm operating costs for the second straight year in 2024, rising 28.6% to $9.1 billion. That is roughly the same amount as farmers paid last year for fertilizer and lime, another major farm operating expense.
