The Bank of Canada kept its overnight interest rate at 2.25%, saying the global economy remained resilient despite trade tensions. The US showed strong growth driven by AI adoption and investment, while the eurozone grew better than expected. China continued to slow on weak domestic demand.
The Canadian economy grew by a surprising 2.6% in the third quarter, driven by trade volatility despite flat domestic demand. The bank expects GDP to be weaker in the fourth quarter, but growth is expected to recover in 2026.
The Canadian labour market is recovering with three consecutive months of job gains and unemployment falling to 6.5%. However, trade-sensitive sectors remain weak, and hiring intentions across the economy remain subdued.
Inflation was 2.2% in October, close to the 2% target for over a year. However, core inflation remains around 2.5% to 3%. The bank expects near-term inflationary pressures to rise slightly due to the GST base effect, but excess economic capacity is expected to offset price pressures.
The bank said its current policy stance is adequate to maintain inflation on target if current projections remain unchanged. However, high global uncertainty means the bank is prepared to act if conditions change, with a focus on maintaining confidence in price stability.
