The Bank of Canada has released a summary of the deliberations held by its Governing Council that led to the monetary policy decision on December 10, 2025. The meetings, which began on December 5 and were presided over by Governor Tiff Macklem, included senior officials such as Senior Deputy Governor Carolyn Rogers and Deputy Governors Toni Gravelle, Sharon Kozicki, Nicolas Vincent, Rhys Mendes, and Michelle Alexopoulos.
Council members started by examining international economic conditions since the October Monetary Policy Report. They noted continued resilience in the global economy despite ongoing US protectionism. In the United States, strong consumer spending and investment in artificial intelligence were cited as key factors supporting growth. However, members also pointed out rising private sector layoffs and a slight increase in inflation due to tariff pass-throughs. “Available information suggested that strong consumer spending and investment in artificial intelligence had continued to support growth,” according to the Council’s summary.
In Europe, economic performance was stronger than anticipated primarily due to increased demand for services. However, a rise in Chinese exports could challenge local manufacturing while higher defense spending might counterbalance these effects. China’s economy remained subdued because of weak household spending and business investment, though exports provided some support.
Members also discussed global financial conditions including oil prices and the Canadian dollar but concluded that these remained largely unchanged since October.
Turning to domestic developments, upward revisions to Canadian GDP for previous years indicated that the economy entered 2025 on firmer ground than previously thought. The third quarter saw GDP grow by 2.6% following a decline of 1.8% in the second quarter; this rebound was mainly attributed to reduced imports and less inventory slowdown than expected. Exports showed only modest improvement while final domestic demand remained flat with decreases in both business investment and consumption.
Labour market data from November showed three months of steady employment gains lowering unemployment to 6.5%. Despite this improvement, many new jobs were part-time and business surveys suggested subdued hiring intentions: “Three months of solid employment growth had pushed the unemployment rate down to 6.5%. While this was a sign the labour market was improving, a broader set of indicators showed a mixed picture.”
Consumer price index (CPI) inflation eased to 2.2% in October as expected; core inflation measures stayed between 2½% and 3%. The Council anticipates CPI inflation may rise slightly over coming months due to temporary factors but expects it will remain near its target as soft demand offsets cost pressures.
The upcoming review of the Canada-United States-Mexico Agreement (CUSMA) was identified as a significant risk for business investment due to uncertainty around trade policy outcomes: “A worst-case scenario involving the dissolution of CUSMA and higher tariffs would be very damaging to the Canadian economy.” Fiscal policies were viewed as better suited than monetary policy for addressing structural changes from global trade reconfiguration.
Despite upward GDP revisions indicating less slack than previously assessed, members agreed excess supply persists in Canada’s economy—particularly with fourth-quarter GDP expected to be weak—and inflation risks remain limited so far because firms are unlikely to pass on cost increases amid subdued demand.
Summarizing their assessment: “Members agreed the Canadian economy was showing signs of resilience after a year of trade upheaval, but uncertainty remained high.” The Governing Council decided unanimously to keep its policy interest rate at 2.25%, stating it is at an appropriate level within their neutral range given current conditions.
Looking ahead, Council members said predicting future rate changes remains difficult amid ongoing uncertainty: “While the current policy rate was at about the right level in the current situation, it was difficult to predict when and in which direction the next change in the policy rate would be.” They reiterated readiness to respond if incoming data or significant shocks warrant a shift from their current outlook.
