Interest Rate: 1)Bank of Canada holds key interest rate at 2.25%, saying economy has proved ‘resilient’; 2)The Conference Board Of Canada – Canada’s Inflation Rate Remained Steady in November; 3) How Much Does Canada’s Budget Move the Needle on Prosperity?
Central bank suggested in October that it was done cutting rates for now
Courtesy CBC News
Jenna Benchetrit, CBC News · Dec 10, 2025
The Bank of Canada held its key interest rate at 2.25 per cent on Wednesday, a move that was widely expected after an encouraging round of third-quarter data showed the Canadian economy has withstood some trade war-induced turmoil.
The current rate is at “about the right level” to give the economy a boost through a “structural transition,” while also keeping inflation close to its two per cent target rate, central bank governor Tiff Macklem said in his opening remarks.
“Nevertheless, uncertainty remains high and the range of possible outcomes is wider than usual. If the outlook changes, we are prepared to respond,” he said.
During the Bank of Canada’s October meeting, the governor warned that the Canadian economy would suffer structural damage from U.S. tariffs, and that monetary policy alone would not be able to fix it.
Since then, the economy has proved hardier than expected, with GDP and jobs growth beating expectations in the third quarter and the unemployment rate dropping to 6.5 per cent in November.
Inflation is hovering just above two per cent, and the Bank of Canada’s core measures of inflation (which strip out volatile components, like gas or tax changes) are trending closer to three per cent.
However, consumer spending and business investment were fairly flat in the third quarter. While that will likely change in the fourth quarter, the bank anticipates that overall economic growth will slow before it picks up again in 2026.
“The general tone of the communique suggests that the threshold for a cut is relatively high and would require a significant deterioration of the outlook,” wrote Charles St-Arnaud, chief economist at Servus Credit Union, in a note to clients.
“Right now, we’re in an economy that’s operating with a lot of slack. So as that’s absorbed, inflation should remain contained next year,” said Katherine Judge, a senior economist at CIBC, in an interview with CBC News.
“So we do think the Bank of Canada will leave the overnight rate at 2.25 per cent for the entirety of next year at this point,” she added.
The fate of the Canada-U.S.-Mexico free trade agreement, which is up for renewal next year, is also weighing on the economy, she said. “Once we have more clarity on the trade file, it’s our view that economic activity will really start to pick up.”
Why the economy has fared better than expected
While the steel, aluminum, auto and lumber sectors have been pummelled by U.S. tariffs, which is weighing more broadly on business investment, “the economy is proving resilient overall,” Macklem said in his remarks.
The governor pointed to recent revisions made by Statistics Canada to the country’s economic growth figures in 2022, 2023 and 2024 as a possible explanation for that resilience.
“The revisions suggest the Canadian economy was healthier than we previously thought before we were hit by the U.S. trade conflict,” he said. “In particular, they suggest both demand and economic capacity were higher coming into this year.”
Bank of Canada governor Tiff Macklem explains why the Canadian economy has withstood some of the pressures foisted on it by the U.S. trade war.
Another point of stability is that, while certain key sectors are grappling with steep tariffs, the rest of the economy “continues to operate largely tariff-free” with the U.S., Macklem pointed out.
“The average tariff rate on Canada from the United States is one of the lowest in the world — about six per cent,” he said. “We haven’t seen spillovers to the rest of the economy.”
‘Canadians are feeling squeezed’
Consumers who are struggling with the cost of living might not be feeling that resilience in the day-to-day, Macklem acknowledged. “Many Canadians are feeling squeezed,” he said.
A recent survey from the Angus Reid Institute showed that 59 per cent of Canadians see the cost of living and inflation as their major economic issue of concern, and that 39 per cent are having trouble keeping up with their household grocery bills.
(The survey was conducted from Nov. 26 to Dec. 1, 2025, among a random sample of 4,025 Canadian adults who are members of Angus Reid Forum. The survey has a margin of error of plus or minus 1.5 percentage points, 19 times out of 20.)
However, both Macklem and senior deputy governor Carolyn Rogers stressed that the bank does not want price levels to drop overall — that could lead the economy into a serious recession.
“Although it sounds good, the idea of prices coming down, that happens when the economy is struggling,” explained Rogers.
Prices come down ‘when economy is struggling,’ says Rogers
Carolyn Rogers, senior deputy governor at the Bank of Canada, explains why an overall drop in price levels would do more harm than good for the Canadian economy.
Deflation — the inverse of inflation — encourages consumers and businesses to put off purchases because they will be cheaper if they wait. It can also force businesses to cut costs, including wages.
“So what we need to do is keep inflation at target and support the structural shift that the economy’s going through,” she said.
“As the economy grows, it will support wage increases and that will help, over time, fix that sense of affordability being tough for Canadians.”
2)The Conference Board Of Canada – Canada’s Inflation Rate Remained Steady in November
In November, the Consumer Price Index (CPI) rose by 2.2 per cent (y/y). This was the same as October’s 2.2 per cent (y/y) increase.
• Gasoline prices rose by 1.8 per cent month-over-month and were 7.8 per cent lower than a year ago. Food price growth accelerated to 4.7 per cent (y/y) following a 3.4 per cent increase in October.
• Core CPI (excluding food and energy) grew by 2.4 per cent in November (y/y), down from 2.7 per cent in October. Rent, purchases of passenger vehicles, and food purchased from restaurants were key contributors to year-over-year CPI growth.
• On a seasonally adjusted basis, the CPI rose by 0.2 per cent from the previous month (following a 0.1 per cent increase in October).
• The average of the Bank of Canada’s two preferred core inflation measures decreased to 2.8 per cent (y/y) in November from 3.0 per cent in October. Both CPI-median and CPI-trim fell to 2.8 per cent (both down from 3.0 per cent in October)
Key insights
Canada’s CPI grew by 2.2 per cent in November, comfortably near the Bank of Canada’s 2.0 per cent target. Given their weight in the CPI, upward pressures stemmed in part from some shelter-related costs. Rent, for example, grew by 4.7 per cent (year-over-year), though this was down from a 5.2 per cent increase in October. Passenger vehicle prices were also a top contributor to overall price growth and were up by 3.7 per cent. However, the pace of overall price growth was tempered primarily by gasoline prices, which are still markedly lower than at the same time last year due to the removal of the consumer carbon tax. Lower prices for travel tours and natural gas also helped to temper the overall rate of CPI growth.
Inflation readings will be volatile over the next six months. Last year, the federal government’s GST/HST holiday lowered the prices for many items in the CPI, particularly restaurant meals. As these taxes are again included in final consumer prices, the year-over-year comparisons for these items will be notably higher from mid-December to mid-February. Similarly, beginning in April 2026, year-over-year prices for gasoline will no longer reflect the removal of the carbon tax. The downward pull stemming from gasoline prices that has moderated overall inflation over the last year will dissolve.
With inflation near its 2.0 target, the Bank of Canada held interest rates steady in early December. We expect the Bank has reached the end of its current rate-easing cycle. The Bank’s policy rate now sits at the lower end of its neutral range (where monetary policy neither stimulates nor restrains economic growth). While core inflation remains elevated, it will fall as shelter prices continue to decline. With most Canadian counter-tariffs removed at the beginning of September, many immediate inflationary pressures have dissipated. Weak expected consumer demand through the next year will also moderate the pace of price growth. In this context, businesses are reticent to raise prices even as many face higher costs (e.g., from trade disruption).
Canada in a Changing World
The relationship between Canada and the United States is being reset. During this time of uncertainty, The Conference Board of Canada is examining what Canada must do to not just survive but thrive in this changing world. We will look at what is required to expand our national security capabilities, build our economic resilience, address our domestic priorities, and reimagine how we engage with the rest of the world.
Tariff Impacts
U.S. tariff policies are reshaping the economic landscape for Canadian industries, with consequences that vary across provinces. As trade with the U.S. becomes less predictable, Canada must look inward—reducing interprovincial trade barriers, strengthening domestic supply chains, and accelerating trade diversification efforts. How can federal and provincial policymakers work together to mitigate these risks and ensure economic resilience?
Geopolitical Partners and Trade Relationships
With global alliances in flux, Canada’s trade relationships are being redefined. While the U.S. remains a central partner, diversification efforts with Europe, the Indo-Pacific, and other economies are becoming increasingly critical. How should Canada adapt its trade strategy in the face of shifting global power dynamics?
National Security
Canada’s defense strategy is under increasing pressure as geopolitical tensions rise. With Arctic sovereignty challenged by global powers, Canada must make critical decisions about defense investments. How will Canada balance fiscal constraints with the need to assert sovereignty and meet evolving security commitments?
Strategic Industries
Canada’s position in key strategic sectors—critical minerals, artificial intelligence, clean energy, and advanced manufacturing—will determine its role in the global economy. As the U.S. and other nations accelerate industrial policies to gain competitive advantages, Canada must define its own path. What investments and policy shifts are required to secure leadership in these sectors?
3) How Much Does Canada’s Budget Move the Needle on Prosperity?
Canadian Economics November 26, 2025
Geopolitical tensions, trade wars and a change in posture from the United States have ushered in new thinking in Canada. The days of being a beneficiary of a reliable, transparent and predictable operating environment promised by U.S. leaderships looks to be behind us. Instead, the need for a self-determined destiny has taken national attention.
Cory Renner, Richard Forbes
Research, Conference Board of Canada