The Bank of Canada held its key interest rate at 2.25% and cut its 2026 GDP growth forecast to 0.7%, the central bank announced. The decision keeps borrowing costs steady while signaling a weaker economic outlook ahead.
Rate decision
The central bank opted to leave its benchmark rate unchanged at 2.25%. The hold comes as the bank revised down its projection for economic growth in 2026 to just 0.7%, a notable downgrade from previous estimates. The move suggests the bank is taking a cautious stance amid mixed signals on inflation and growth.
Growth forecast cut
The new GDP forecast of 0.7% for 2026 reflects expectations of slower expansion. The downgrade indicates the central bank sees headwinds that could dampen economic activity over the next few years. A growth rate that low is well below the economy's potential, pointing to a prolonged period of sluggish output.
What the hold means for borrowers
For homeowners with variable-rate mortgages and other floating-rate loans, the steady rate means no immediate change in payments. However, the weaker growth outlook could lead to future rate cuts, which would lower borrowing costs. On the other hand, if the economy slows too much, it could hurt employment and incomes. The bank's decision balances these risks.
Next steps
The Bank of Canada's next scheduled rate announcement will be closely watched. The central bank will likely provide updated economic projections at that time. For now, the message is clear: the bank is holding steady but preparing for a slower economy. The lower GDP forecast raises questions about how long the bank can keep rates at this level without further action.
