Good morning. The Bank of Canada’s decision to hold its trend-setting interest rate signals borrowing costs are likely at their lowest – at least, for a while. What that says about the bank’s economic outlook – and the decision facing mortgage shoppers – will be in focus today.
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In the news
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Compliance: A review of more than 100 Canadian wealth managers found that some companies have not yet updated their compliance procedures to meet new requirements when selling investment products.
Bank of Canada senior deputy governor Carolyn Rogers and Governor Tiff Macklem enter yesterday's news conference.Justin Tang/The Canadian Press
In focus
A shift in the bank’s economic outlook
The Bank of Canada held its benchmark interest rate steady on Wednesday, moving onto the sidelines for what financial markets expect to be an extended pause.
After making four cuts since January, the central bank held its policy rate at 2.25 per cent.
With the Canadian economy “proving resilient” in the face of U.S. tariffs, Bank of Canada Governor Tiff Macklem said the policy rate was at “about the right level to keep inflation close to 2 per cent while helping the economy through this period of structural adjustment.”
Statistics Canada recently revised its estimates of economic growth going back to 2022 – an update that nudged Canada’s recent performance into slightly stronger territory. Think of it as tapping the TV and getting a sharper signal: The colours are brighter, but the narrative arc of this prestige drama hasn’t changed dramatically.
In his remarks to reporters yesterday, Macklem acknowledged the revisions, but he largely attributed that stronger growth to volatile trade data. Trade-sensitive sectors remain weak, and corporate Canada’s hiring intentions are still fragile, he said.
Mortgage mania?
For prospective homebuyers who’ve been waiting for interest rates to bottom out, this might be the sign to get off the fence.
The end of the rate-cutting cycle could breathe new life into Canada’s frigid housing market. More certainty about interest rates could give the market “an additional oomph,” Erica Alini (delightfully) wrote on The Globe’s liveblog, “prompting more buyers to begin house-shopping in earnest.”
In her story on the decision facing potential homebuyers and sellers, Meera Raman reports that the predictability provided by an extended rate hold might be a catalyst for activity in a sluggish market.
“Certainty is a wonderful thing for the housing market,” Royal LePage sales representative Tom Storey said.
Many economists predict the bank will stand pat for the entirety of 2026. A cut might be on the table, but there’s growing chatter about a hike. Yikes!
Variable or fixed? It’s mixed.
A hike is unlikely, but it’s clear borrowing costs have likely hit their bottom – at least for the time being. “Canada is still dealing with the heavy cloud of U.S. trade uncertainty, a cloud that is very unlikely to disperse anytime soon,” Douglas Porter, Bank of Montreal’s chief economist, wrote in a client note yesterday.
- For anyone waiting for the cheapest time to take on a mortgage, now-ish could be their safest bet.
- The new math really only helps shoppers of variable rates, which tend to move in sync with the central bank’s rate.
- Fixed-rate borrowers have little reason to cheer. Strong economic data have also pushed up bond yields, which are used by lenders as a measure of where the economy is going.
- Those products provide consumers peace of mind that they’re protected against potential borrowing spikes, but eliminate the possibility of lower payments in the event the bank cuts rates again.
Sounding off
In a question period with reporters, Macklem addressed a range of issues headlining Canada’s rocky outlook:
Asked about a new pipeline to the West Coast, he pointed to the Trans Mountain pipeline expansion as “an important example” of efforts to diversify trade:
“It has allowed us to increase our exports to the non-U.S.,” he said. It’s not a huge shift in our total exports, he said, “but on the margin, it’s helping us get more oil to other countries.”
“We do need to diversify trade, and part of that is better east-west transportation, better port capacity to get our products to the rest of the world. And yes, part of that is pipeline capacity.”
He stressed the importance of boosting incomes to address affordability:
”How do we grow income? Well, we need to improve our productivity. We need to invest more. We need to diversify our trade. That’s what’s going to grow income. With more income, then everything becomes more affordable.“
And on the trajectory of the bank’s monetary policy, he suggested nobody puts baby in a corner:
“I’m not going to put our policy on a timeline.”
- Fight, said Fed: The Federal Reserve lowered its key rate by a quarter-point, but signalled a pause in the coming months – potentially attracting the ire of the cut-forward U.S. President Donald Trump.
- Opinion: Don’t be surprised if the Bank of Canada raises interest rates next.
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In a challenging year for the economy, many Canadians are looking to cut back on discretionary purchases. But one area seems particularly immune to their penny-pinching efforts: entertainment. Bianca Thompson has more.
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More files we’re following
On the Hill: Prime Minister Mark Carney chairs a cabinet meeting as the House winds down for the holidays. Finance Minister François-Philippe Champagne hosts a meeting with provincial and territorial finance ministers to discuss economic issues.
At the bell: Analysts expect Dollarama Inc. to raise its full-year sales forecast in Canada as consumers seek ways to save. Lululemon Athletica Inc. earnings could also show gains from recent discounting efforts, as the athletic apparel brand cools down from a rocky 2025.
Morning update
Global markets were mixed as renewed worries over tech valuations after Oracle’s weak forecast offset investor relief from the U.S. Federal Reserve’s less-hawkish-than-anticipated comments after it cut interest rates.
Wall Street futures were in negative territory, while TSX futures followed sentiment lower after Canada’s main stock market closed at a fresh record high yesterday.
Overseas, the pan-European STOXX 600 was up 0.22 per cent in morning trading. Britain’s FTSE 100 rose 0.17 per cent, Germany’s DAX advanced 0.05 per cent and France’s CAC 40 gained 0.39 per cent.
The Canadian dollar traded at 72.49 U.S. cents.