FX.co ★ Bank of Canada Holds Rate as Expected

The Bank of Canada, during its January 2026 meeting, decided to keep its overnight target rate steady at 2.25%, a move that aligns with market expectations and follows its previous guidance. This decision reflects the Bank's assessment that the existing policy stance is appropriate in light of its baseline economic forecast. However, the recent tariff threats posed by US President Trump have renewed fears of potential trade disruptions. As a result, the Governing Council has indicated that uncertainty remains, which could necessitate adjustments to monetary policy in either direction. The central bank has largely sustained its economic projections from the October Monetary Policy Report, forecasting a Canadian GDP growth of over 1% for this year and 1.5% for the next. Furthermore, the CPI inflation rate is anticipated to hover near the 2% target, as trade-related cost pressures are counterbalanced by an excess supply in the economy.