Bank of Canada holds interest rate at 2.25%

The Bank of Canada kept its policy interest rate at 2.25% for a second meeting, saying the economic outlook is little changed from the October Monetary Policy Report while risks from U.S. trade policy and geopolitical tensions are elevated.

The Bank of Canada has held its key policy interest rate at 2.25% for a second consecutive meeting. The bank said the outlook for the global and Canadian economies is little changed from its October Monetary Policy Report. Officials noted that uncertainty around the forecast is higher than usual and pointed to unpredictable U.S. trade policy and elevated geopolitical risks. The statement also highlighted stronger-than-expected U.S. growth tied to AI investment and consumer spending, and a gradual slowdown in China's GDP. Key points: - The policy interest rate was held at 2.25% for a second meeting. - The outlook is reported as little changed from the October Monetary Policy Report. - The bank cited elevated uncertainty from unpredictable U.S. trade policy, the upcoming CUSMA review, and geopolitical risks. - U.S. growth has outpaced expectations, driven in part by AI-related investment and consumer spending, and U.S. tariffs are contributing to higher U.S. inflation with effects expected to fade later in the year. - The Bank reported that Canadian GDP likely stalled in the fourth quarter as U.S. tariffs weighed on exports, while domestic spending appears to be picking up. Summary: The decision leaves borrowing costs unchanged and reiterates the previous economic projection while noting a wider range of possible outcomes. Officials emphasized trade policy and geopolitical developments as key sources of uncertainty. Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers are scheduled to hold a news conference to explain the decision.