Bank of Canada holds key interest rate at 2.25%

The Bank of Canada is holding its key interest rate at 2.25 per cent, 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.

Central bank governor Tiff Macklem wrote in his opening remarks that the current rate is at “about the right level” to give the economy a boost while also keeping inflation close to its two per cent target rate.

Canada’s economy proved hardier than expected in the third quarter, with GDP and jobs growth beating expectations, and the unemployment rate dropping to 6.5 per cent in November.

But the bank noted that consumer spending and business investment were fairly flat. That will likely change in the fourth quarter, but the bank anticipates that economic growth could slow.

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.

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 written remarks.

However, “uncertainty remains elevated,” the central bank wrote in its press release. “If the outlook changes, we are prepared to respond.”

Macklem is expected to discuss the decision at 10:30 a.m. ET, alongside senior deputy governor Carolyn Rogers. That news conference will be carried live here.