Rates unchanged, focus shifts to trade and global risks

This is a summary of the main highlights following the BoC’s interest rate decision earlier on Wednesday.

• The Bank of Canada held its policy rate at 2.25%, as expected, reinforcing a cautious, wait-and-see stance amid lingering uncertainty.
• Beyond the near term, the growth outlook remains soft: 2026 GDP remains at 1.1%, with a sharp downgrade to flat growth in Q4 activity.
• Inflation projections edged lower, with CPI now seen averaging 2.0% in 2026, while estimates for the neutral rate were left unchanged at 2.25%–3.25%.
• Governor Tiff Macklem struck a sober tone on trade, warning that adjustment to US tariffs will be long-lasting and that the era of open, rules-based trade with the US is effectively over.
• Macklem highlighted the increasing geopolitical risks, acknowledging the dent in the US Dollar’s safe-haven role and emphasising the crucial need to maintain the Federal Reserve’s independence.