Bank of Canada announces key interest rate decision

"With fiscal stimulus expected to support growth and employment, the Bank has less incentive to push rates further into stimulative territory. Given ongoing uncertainty around trade and uneven underlying economic conditions, we do not anticipate any rate increases through 2026.” wrote Ashish Dewan, Investment Strategist at Vanguard Canada in response to the announcement. 

The decision also came with updates to the BoC's economic outlook, last published in the October Monetary Policy Report. 

"Economic growth is projected to be modest in the near term as population growth slows and Canada adjusts to US protectionism. In the projection, consumer spending holds up and business investment strengthens gradually, with fiscal policy providing some support," the release reads. "The Bank projects growth of 1.1% in 2026 and 1.5% in 2027, broadly in line with the October projection. A key source of uncertainty is the upcoming review of the Canada-US-Mexico Agreement."

The BoC's business outlook survey released earlier in January found that business sentiment was subdued to end 2025, but had improved from the lows hit in Q2 of that year, at the height of US tariff tensions.