Bank of Canada Holds Rates, Economy Looks Better than Expected Despite Tariffs 

• The Bank of Canada held its key policy rate steady at 2.25% on Wednesday as widely expected. Governor Tiff Macklem said the economy was proving resilient overall to the effect of U.S. trade measures.
• Despite tariffs between 25.0% and 50.0% on some critical sectors such as cars, lumber, aluminum and steel, Canada's economy has shown signs of strength.
• Third quarter annualized GDP grew by 2.6%, much more than expected, while employment data showed the economy added 181,000 new jobs between September and November. "It's been a difficult year for Canadians and Canadian businesses, but as the year is closing, it's looking better than it looked in the spring, in the summer," Macklem said during a press conference after the rates decision.
• Macklem said the impact of tariffs has not totally spilled over into the broader economy. Uncertainty remains high and if the outlook changes, the bank is ready to respond, Macklem said, reiterating comments he made when the bank cut rates in October to their current level.
• "Governing Council sees the current policy rate at about the right level to keep inflation close to 2.0% while helping the economy," said Macklem. Macklem said even though the economy had shown some resilience, he expected GDP growth to be weak in the fourth quarter and hiring intentions to be muted.
• While the economy is adjusting to tariffs, volatility in trade and quarterly GDP numbers are making it more difficult to assess the underlying momentum of the economy, Macklem noted. The recent data has "not changed our view that GDP will expand at a moderate pace in 2026 and inflation will remain close to target."

(Source: Reuters)