Canada's Economy: Steady Rates, Uncertain Future
January 2026
The Bank of Canada has decided to maintain interest rates at 2.25% in late January 2026. This decision aligns with market expectations, reflecting the current economic climate.
Economic Outlook
The bank's outlook for both the global and Canadian economies remains largely unchanged since their last forecast in October. Inflation is projected to stay near the 2% target over the next few years. The bank's statement emphasized that the current interest rate is still appropriate, with a readiness to act if the economic situation shifts.
GDP Growth Projections
Canada's economic growth is expected to be slow in the near term, attributed to slowing population growth and adjustments to US protectionism. The GDP growth for 2025 was revised upwards to 1.7%, indicating a stronger economy than previously anticipated.
Looking ahead:
- 2026 GDP Growth: 1.1%
- 2027 GDP Growth: 1.5%
- 2026 Inflation: 2.0% (slightly lower than previously expected)
Global Economic Insights
The US economy is growing faster than expected, while the Eurozone and China are experiencing more modest growth. The Canadian dollar strengthened slightly following the announcement, likely due to the bank's revised GDP figures and the market's reaction to the interest rate decision.
Uncertainties and Commitments
The bank's statement highlighted uncertainties surrounding US trade policies and geopolitical risks, which could significantly impact Canada's economic outlook. Despite these uncertainties, the bank remains committed to keeping inflation near the 2% target.
