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The Bank of Canada’s (BoC) policy interest rate is a vital tool that influences not only the economy, but also your personal finances! It is set by the BoC and determines the cost of borrowing and the returns on savings. By understanding how it works, you will be better prepared to adapt your financial decisions to economic changes: mortgage, savings and other loans.
On December 10, 2025, the Bank of Canada (BoC) announced it was maintaining its policy rate at 2.25%.
It deemed this level remained appropriate to keep inflation near its target of approximately 2% while supporting the economy.
The statement noted that the Canadian economy has recently shown some strength: including growth in gross domestic product (GDP), the job market, etc. Despite this, uncertainty persists due to trade tensions. The BoC stated it remains prepared to act if economic data or inflation deteriorates.
This decision provides some stability to financial markets, lenders, and variable-rate borrowers, at least in the short term.
The next Bank of Canada decision is on January 28, 2026.
On October 29, 2025, the Bank of Canada (BoC) lowered its target for the overnight rate by 25 basis points to 2.25%.
With this move, the BoC aimed to support the economy facing uncertainties related to international trade.Bank of Canada
According to the statement, underlying inflation was around 2.5%, while key indicators showed a slowdown in activity.
The Bank judged that this new rate level was appropriate to keep inflation near 2% while supporting the economy through its adjustment period.
Consequently, many borrowers (variable mortgages, lines of credit) were able to benefit from slightly more flexible financing conditions. For savers, this could have meant an adjustment to the rates offered on savings accounts or GICs.
On September 17, 2025, the Bank of Canada (BoC) announced a 25-basis-point reduction in its policy interest rate, bringing it down from 2.75% to 2.50%, the lowest level in 3 years. This unanimous decision by the Governing Council comes amidst a significantly weakened labor market: significant job losses, rising unemployment, and negative economic growth in the second quarter.
The BoC also notes that underlying inflation, although still above the 2% target, is tending to ease. The Canadian government’s withdrawal of most retaliatory tariffs against the United States is cited as a factor helping to control inflationary pressures.
For borrowers, this reduction in the policy interest rate should ease payments on variable-rate loans, lines of credit, and mortgages. However, the decision remains dependent on upcoming economic data, particularly regarding employment and inflation.
On July 30, 2025, the Bank of Canada once again maintained its policy interest rate at 2.75%. This was the third consecutive status quo decision. The reasons cited include the relative resilience of the Canadian economy, persistent inflationary pressures, and external risks (tariffs, international trade, etc.).
On June 4, 2025, the Bank of Canada maintained the policy interest rate at 2.75%. It indicated that the Canadian economy was showing signs of slowing, without a sharp decline, while underlying inflation remained stronger than anticipated. This decision reflects a desire for caution in order to assess the impact of global economic uncertainties and international trade policies.
On April 16, 2025, the Bank of Canada maintained the policy interest rate at 2.75%. The decision is explained by economic data showing a moderate weakening of growth, but inflation remaining just above expectations. Uncertainties related to U.S. tariffs remain a factor in its cautious stance.
On March 12, 2025, the Bank of Canada (BoC) lowered the policy interest rate by 25 basis points, from 3.00% to 2.75%. This decline is part of a cycle of consecutive reductions, marked by uncertainties related to tariffs imposed by the United States and trade tensions that threaten growth.
Inflation is now close to the 2% target, but the Bank remains vigilant, as underlying inflationary pressures and remaining housing costs raise concerns.
For borrowers, this means relief on variable rates and a possible decrease in payments related to variable-rate loans and mortgages.
On January 29, 2025, the Bank of Canada (BoC) decided to reduce its policy interest rate to 3% with a further cut of 25 basis points. This is a sixth consecutive decline. Furthermore, it announces the end of quantitative tightening so that its balance sheet can stabilize and then begin to grow in line with the growth of the economy. Since June 2024, the BdC’s policy interest rate has fallen from 5% to 3%.
Thus, Canadians with variable-rate mortgages will see a decrease in their interest payments starting tomorrow (January 30). In addition, interest rates on personal loans are also expected to fall by a quarter of a percentage point.
This announcement comes in a context where inflation in Canada is under control; the Consumer Price Index (CPI) is up by 1.8% on an annual basis in December 2024 (compared to an increase of 1.9% in November 2024). In addition, the BoC forecasts GDP growth of 1.8% in 2025 and 2026, with inflation remaining within its 2% annual target.
That said, the Bank of Canada’s press release indicates that there is a great deal of uncertainty surrounding the Canadian economy in relation to U.S. tariffs. President Donald Trump is threatening to impose 25% tariffs on Canadian imports, effective February 1st, 2025.
On December 11, 2024, the Bank of Canada (BoC) decided to reduce its key interest rate to 3.25% with a further cut of 50 basis points. Depuis le mois de juin 2024, ce dernier est passé de 5 % à 3,25 %.
This announcement comes at a time when inflation is hovering around 2%, and recent economic growth has been weaker than expected. In fact, growth stood at 1% in the third quarter of 2024 and is expected to be even more modest in the final quarter. Additionally, the unemployment rate rose to 6.8% in November. Finally, Donald Trump’s threat to impose tariffs on Canadian imports is a major source of uncertainty for the economic outlook.
Furthermore, the Bank of Canada announced in its recent press conference that 50-basis-point rate cuts are over and that future cuts will be more gradual.
The Bank of Canada (BoC) is the central bank of Canada. Elle a été créée en 1934 pour maintenir la stabilité économique et financière du pays.
Its primary mandate is to preserve the value of your money by controlling inflation. It accomplishes this through four key roles: managing monetary policy, ensuring a secure financial system, designing and distributing banknotes, and acting as the government’s financial agent.
Although it doesn’t directly serve citizens, it influences the economy and your finances by setting the policy interest rate.
The policy interest rate, also known as the target for the overnight rate, is the rate at which major financial institutions borrow or lend funds for one day. The Bank of Canada adjusts this rate to keep inflation at its 2% target, within a range of 1% to 3%.
When the Bank of Canada raises the policy interest rate, borrowing becomes more expensive, slowing the economy. Conversely, a decrease makes credit less expensive, stimulating spending and investment. This mechanism is at the heart of the BoC’s monetary policy.
The Bank of Canada meets eight times a year to review and adjust the policy interest rate. Rate changes, if necessary, are generally in the order of 25 basis points. However, changes of 50 basis points are also possible, as was the case in 2024. In some years, there may be no change at all. In short, these decisions are based on inflation and economic growth.
Here’s the difference between these rates:
The current rate is 2.25% and the next Bank of Canada decision is on January 28, 2026.
Here are the dates of the Bank of Canada meetings in 2025:
Then, those for 2026:
The policy interest rate is an essential tool for controlling inflation and stabilizing the economy. A rise in the rate slows consumption and investment, as borrowing becomes more expensive. A lower rate stimulates these activities, as the cost of borrowing is reduced.
This rate also affects savings rates, the housing market, and the value of the Canadian dollar. By adjusting the policy interest rate, the Bank of Canada directly influences your personal finances and the economy in general.
Variable mortgage rates fluctuate according to the key interest rate. If it increases, your monthly payments will also increase. Fixed mortgage rates, on the other hand, are influenced by long-term bonds. Thus, a higher policy interest rate makes buying a house more expensive.
To compare mortgages, use our mortgage rate comparator.
The policy interest rate influences your financial decisions, particularly regarding your loans and investments. Following announcements from the Bank of Canada helps you anticipate economic changes and adjust your financial strategies. This knowledge can help you better plan your savings, loan repayments, or home purchases.
In short, the policy interest rate is the Bank of Canada’s lever for stabilizing the economy and controlling inflation. It adjusts the rate according to inflation and economic growth. As we’ve seen, rate variations have a direct impact on your finances. For example, mortgage rates. Now that you understand how it works, you can make informed decisions, whether you’re investing, saving or planning a major purchase like a home.
The policy interest rate is the rate set by the Bank of Canada for overnight lending between financial institutions. It influences interest rates throughout the economy.
Because it determines the cost of credit. When it rises, loans and mortgages become more expensive. When it falls, borrowing becomes more affordable.
Variable-rate mortgages generally follow banks’ prime rate, which directly depends on the policy interest rate. A change results in an adjustment to payments.
A higher policy interest rate slows consumption and borrowing, which curbs inflation. Conversely, a decrease stimulates demand and economic activity.
The Bank of Canada issues eight decisions per year, according to an official schedule. Each announcement is followed by detailed economic forecasts.
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