Saying there's little change to the outlook for the global and Canadian economies from its last update in October, the Bank of Canada has decided to hold it's target for the overnight rate at 2.25 per cent.
The Bank Rate will remain at 2.5 per cent, and the deposit rate at 2.2 per cent.
Little change from the last update doesn't mean the Canadian economy doesn't face challenges. The Bank noted it remains vulnerable to unpredictable U.S. trade policies and geopolitical risks.
The Bank said economic growth in the U.S. continues to outpace expectations. Investments in artificial intelligence and consumer spending are expected to keep the American economy on solid footing.
Tariffs are pushing up U.S. inflation, but their impact is expected to gradually fade.
Recent weakness in the U.S. dollar has pushed the Canadian dollar above 72 cents, about the same place it was in October. Oil prices have fluctuated because of geopolitical events, but are expected to fall below levels in the October report.
After a strong third quarter, Canada's gross domestic product likely stalled in the fourth quarter. Domestic demand is picking up, but exports continue to face tariffs implemented by the U.S. Employment has increased, but few businesses plan to hire more workers. The economy also faces uncertainty related to this year's review of the Canada U.S. Mexico Agreement.
Inflation continues to slow, as it has since September. It was 2.1 per cent last year, and it is expected to continue to stay close to the target 2 per cent.
The Bank forecasts growth of 1.1 per cent in 2026, and 1.5 per cent in 2027.
Economic growth in the European Union has been supported by activity in service sectors and will get additional support from fiscal policy, while in China, growth in the country's gross domestic product will likely slow as weaker domestic demand offsets growth in exports.
Overall, the Bank of Canada expects global growth to hit 3 per cent.
The Bank of Canada is expected to make another rate announcement on March 18.
