5 key bullet points:
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BoC held the policy rate at 2.25%, judging it appropriate to keep inflation near 2% during a period of structural trade adjustment.
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US tariffs are hitting key sectors, but the overall Canadian economy remains more resilient than expected.
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CPI inflation stays contained near 2%, with core around 2½–3%, and temporary near-term volatility expected.
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Labour market shows modest improvement, though hiring intentions and trade-sensitive sectors remain weak.
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Elevated uncertainty—especially US trade policy and CUSMA review—means the BoC is prepared to respond if the outlook shifts.
Summary of Tiff Macklem’s Comments
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Policy rate held at 2.25%, with Governing Council judging it as appropriate to keep inflation near 2% while supporting the economy through a structural adjustment caused by US trade conflict.
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Three core messages:
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Severe US tariffs have hit key Canadian sectors (autos, steel, aluminum, lumber), but the overall economy remains more resilient than expected.
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Inflation pressures remain contained, with CPI near 2% for over a year and core measures in the 2½–3% range.
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Given the current balance of risks, the policy rate is at the right level, though uncertainty is unusually high and the Bank is ready to respond if the outlook shifts.
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Revised GDP data show the economy entered 2025 healthier than previously thought, with stronger demand and capacity prior to the trade shock—helping explain current resilience.
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Recent economic performance is mixed: Q3 GDP surged 2.6% due to volatile trade, but final domestic demand was flat, and Q4 GDP is expected to be weak before growth improves in 2026.
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Labour market showing improvement, with three months of job gains and a drop in unemployment to 6.5%, though trade-sensitive sectors remain fragile and hiring intentions across the economy are soft.
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Inflation evolving largely as expected; headline CPI at 2.2%, with temporary volatility ahead due to last year’s GST/HST holiday. Underlying inflation remains around 2½%, and economic slack should help keep CPI near target.
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Fiscal policy will add some support, with higher defence spending and investment incentives contributing to growth over time. Updated fiscal impacts will be incorporated into the January projection.
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Governing Council views the policy rate near the lower end of neutral as appropriate: accommodative enough to support adjustment, but consistent with containing inflation.
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Uncertainty remains elevated, especially around US trade policy and the upcoming CUSMA review, making it harder to judge underlying economic momentum due to volatility in trade flows and GDP.
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Macklem emphasized that Canada faces a structural transition, not just a cyclical slowdown
BOC Macklem: Given the current balance of risks, the policy rate is at the right level
