The Bank of Canada has announced its decision to leave its benchmark lending rate unchanged at 2.25 per cent in the final monetary policy update of 2025. This decision comes as a relief to Canadians who have been eagerly waiting for updates on the country’s economic outlook.
The decision to keep the interest rate steady was made by the Bank’s governing council, which takes into account various economic factors such as inflation, employment, and economic growth. The council’s main objective is to ensure price stability and promote a healthy and sustainable economy.
In their statement, the Bank’s governing council acknowledged the recent surge in inflation, which reached a 20-year high of 4.7 per cent in October. However, they believe that this increase is mainly due to temporary factors such as supply chain disruptions and higher energy prices. They expect inflation to gradually return to their target of 2 per cent in the next few months.
The Bank also noted the strong recovery of the Canadian economy, which has rebounded faster than expected from the pandemic-induced recession. The country’s GDP is expected to grow by 6.3 per cent this year, followed by a solid 4.2 per cent in 2026. This is due to the successful vaccination rollout, strong consumer spending, and a rebound in global demand.
However, the Bank also highlighted some risks to the economic outlook, including the ongoing uncertainty surrounding the pandemic and potential further disruptions to global supply chains. The recent surge in COVID-19 cases and the emergence of new variants could also pose a threat to the recovery.
Despite these risks, the Bank remains optimistic about the future of the Canadian economy. They have maintained their view that the current level of monetary policy stimulus is appropriate and necessary to support the recovery. The Bank’s governing council also reiterated their commitment to keeping the policy rate at the effective lower bound until the economy reaches its full potential.
This decision to hold the interest rate steady is good news for Canadian borrowers, as it will help keep borrowing costs low. This will be especially beneficial for households who have taken on high levels of debt during the pandemic. It also provides businesses with the confidence and stability they need to make long-term investment decisions, which will contribute to the country’s economic growth.
The Bank’s decision to maintain their current monetary policy stance aligns with the sentiments of other central banks around the world, who are also maintaining low interest rates and accommodative monetary policy measures to support their respective economies.
In conclusion, the Bank of Canada’s decision to keep its benchmark lending rate unchanged at 2.25 per cent is a positive step towards promoting a strong and sustainable economic recovery. It reflects the Bank’s confidence in the resilience of the Canadian economy and its commitment to supporting it through these challenging times. As we enter the new year, let us look forward to a brighter future for Canada’s economy.
