Bank of Canada announces first rate decision of 2026

The Bank of Canada is holding its benchmark interest rate steady to begin the year, keeping that trendsetting rate unchanged as it weighs up the economic outlook for 2026.

The central bank announced on Wednesday that the policy rate, which leads variable mortgage and home equity line of credit (HELOC) rates in Canada, would remain at 2.25% – continuing a pause that began in December.

There were few surprises in the Bank’s first interest rate decision of the year. Most experts had expected the central bank to hold rates steady even before a hotter-than-expected December inflation print effectively killed any chances of a cut.

In its statement, the Bank said the global and Canadian economic outlook remained “little changed” since October, but highlighted potential volatility ahead from US trade policy and other geopolitical risks.

Those US trade restrictions are continuing to impede the Canadian economy, the Bank said, with growth set to remain “modest” in the near term amid slowing population growth.

It sounded a largely positive note on the inflation outlook, with the consumer price index (CPI) expected to stay close to the Bank’s 2% target in the months ahead, and signalled that the current policy rate “remains appropriate” to achieve that aim barring unexpected developments.

“However, uncertainty is heightened,” the Bank added, “and we are monitoring risks closely. If the outlook changes, we are prepared to respond.”

The BoC opted to lower rates four times last year, cutting by a full percentage point through four 25-basis-point reductions. But in December, governor Tiff Macklem strongly indicated a prolonged pause was its next likely course of action – and economists don’t see a cut anytime soon.

The big imponderable for Bank policymakers for the year ahead remains US trade policy and question marks over whether Donald Trump intends to ramp up tariff tensions with Canada.

A sudden escalation of the trade turmoil that’s rumbled since the beginning of last year could change the central bank’s thinking on rate policy – but for now, Macklem and the Governing Council appear convinced that rates are where they need to be.

For variable-rate borrowers, that means no relief for now, although rates remain well below where they sat for much of the past two years.

Since the middle of 2024, the central bank’s policy rate has slid by 275 basis points, brightening the picture for buyers and owners whose mortgages are coming up for renewal.

The Bank’s next decision is scheduled for March 18, with six further announcements pencilled in for April, June, July, September, October, and December.

Source: Canadian Mortgage Professional