Perspectives What the Bank of Canada’s rate hold might tell us about 2026
Dec 10, 2025
Jean-François Perrault, Chief Economist at Scotiabank, sheds light on the Bank of Canada’s decision to maintain interest rates at 2.25%. He breaks down the surprising resilience of the Canadian economy amidst tariffs and trade uncertainty, attributing it to factors like strong job growth and housing market boosts. Perrault provides an outlook for 2026, suggesting potential rate hikes, and discusses the impact of inflation on food and housing prices. His insights are vital for understanding future economic trends and their implications for consumers.
AI Snips
Chapters
Transcript
Episode notes
Rate Hold Reflects Mixed But Stronger Data
- The Bank of Canada kept its policy rate at 2.25% as expected given mixed signals in the data.
- Jean-François Perrault highlights strong recent GDP and job gains that complicated the decision but weren't enough to prompt a hike.
Why The Economy Has Been More Resilient
- Canada's resilience stems from lower imports, buoyant equity markets, and firmer housing and auto sales.
- Perrault notes these factors offset tariff-related drag and supported surprising job and GDP strength.
Inflation Outlook: Downward Trend With Upside Risks
- Inflation is expected to drift down as excess capacity builds, but upside risks persist from wages, productivity, and tariffs.
- Perrault expects the Bank of Canada may reverse some 2025 cuts and lift rates toward neutral in H2 2026 as a precaution.