Key Takeaways:The Bank of Canada (BoC) just held its interest rate steady at 2.25% at its January 28 announcementThe BoC also opted to hold its rate at its last meeting of 2025 in DecemberTD Senior Economist Andrew Hencic said the central bank is likely to keep its interest rate as-is for the foreseeable future.
At its first rate announcement of 2026, Canada’s central bank decided to keep its interest rate unchanged at 2.25%.The Bank of Canada (BoC) said in its January 28 announcement that its Governing Council thinks “the current policy rate remains appropriate, conditional on the economy evolving broadly in line” with the outlook it published today.”However, uncertainty is heightened and we are monitoring risks closely,” the BoC said in its rate announcement. “If the outlook changes, we are prepared to respond. The Bank is committed to ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.”Andrew Hencic, a Senior Economist at TD Economics, said that the rate hold was expected by the market.The slight uptick in inflation last month was driven by temporary GST cuts, so the emphasis is on the near-term developments in core inflation measures that continue to cool, Hencic said.“The Bank of Canada assesses the data as it comes in, and the central bank has signaled that it’s pretty happy with the stance of monetary policy, all things considered,” Hencic said.“Things are evolving relatively close to the BoC’s views, so it didn’t see any reason to change course.”
What a rate hold means for Canadians
The central bank’s interest rate is used as a benchmark by banks to set their own interest rates on financial products such as mortgages, personal loans, and business loans.So, when the BoC cuts its rate, it can become cheaper to borrow money. And when the BoC’s interest rate goes up, it can become more expensive.When the BoC holds its rate steady, not much changes for Canadians. For Canadians with both variable rate mortgages and fixed rate mortgages, things will remain status quo.
Will there be interest rate cuts in 2026?
Unless there is some unexpected movement in the economy, it’s likely the BoC will keep its interest rate on pause for 2026, Hencic said. The central bank looks for inflation to sit around 2%, and as of now, it is closing in on that target.“The BoC is trying to deduce what inflation might do in the future based on supply and demand in the economy,” Hencic said.“And in TD Economics’ opinion, when the central bank looks at the economy in totality, it looks like there’s going to be balance between supply and demand that’s going to keep inflation trending towards its 2% target by later this year.”stories.td.com/ca/en/article/bank-of-canada-interest-rate-announcement-january-2026 |
