Canada Monetary Policy Research Brief

Central bank holds as expected. The Bank of Canada kept its overnight rate at 2.25 per cent in December, a widely anticipated move. Policymakers cited continued global resilience — specifically strong U.S. consumption and AI-related investment — but emphasized that uncertainty remains high. For Canada, the country posted a surprisingly strong 2.6 per cent GDP gain in the third quarter despite a decline in domestic demand. An increase in net trade and government capital formation largely drove this growth. At the same time, Canada’s labour market has shown resilience in recent months. Domestic demand is forecast to improve in the fourth quarter, yet weaker net exports are likely to keep near-term growth soft. That said, the Bank anticipates a pickup in 2026 as the economy adjusts to the ongoing global trade reconfiguration.