The Bank of Canada held its key policy rate steady at 2.25% today as widely expected, and Governor Tiff Macklem said the economy was proving resilient overall to the effect of US trade measures.
Despite tariffs between 25% and 50% on some critical sectors such as cars, lumber, aluminum and steel, Canada's economy has shown signs of strength.
Third quarter annualised GDP grew by 2.6%, much more than expected, while employment data showed the economy added 181,000 new jobs between September and November.
"So far, the economy is proving resilient," Macklem said in opening remarks to reporters, adding that inflationary pressures continue to be contained. Overall inflation is just above the bank's 2% target.
"Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy," said Macklem.
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.
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."
The consumer price index eased to 2.2% in October but economists have regularly flagged that measures of core inflation, which strips out volatile components, have stayed around 3%, the top end of the Bank of Canada's inflation target.
In the months ahead, the Bank of Canada expects some choppiness in headline inflation which would push inflation temporarily higher in the near term.
But Macklem said the ongoing economic slack would roughly offset these cost pressures. He said the bank expects the growth in final domestic demand to resume after registering a flat growth in the third quarter
