The Bank of Canada’s next interest rate decision on December 10, 2025 is one of the most anticipated announcements of the year. After cutting the overnight rate to 2.25% in October, economists are now divided on whether the Bank will continue easing or pause to assess the economy.

Most experts agree on one thing: a hold is now the most likely outcome. Here’s what analysts, economists, and financial institutions are predicting – and why.

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The Consensus: A December Rate Hold at 2.25%

A wide range of experts expect the Bank of Canada (BoC) to keep rates unchanged in December. Traders and economists surveyed in late November point to strong GDP growth and steady inflation as reasons the Bank may pause further cuts.

According to Reuters, analysts at major Canadian banks say the recent 2.6% annualized GDP growth in Q3 reduces the urgency for another cut, reinforcing expectations for a hold at 2.25% (Reuters, 2025a). Scotiabank economists added that recent data “reinforces the outlook for steady policy for the foreseeable future,” signaling confidence that the easing cycle may be on pause (Reuters, 2025b).

Mortgage and financial forecasting firms echo this sentiment, suggesting that 2.25% may already be near the bottom of the Bank’s neutral-rate range (Nesto, 2025).

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Why Experts Believe the Bank Will Pause

Several economic indicators are shaping forecasts:

1. Stronger-Than-Expected GDP Growth

Canada’s Q3 performance surprised the market, with exports driving growth and easing recession concerns. However, TD economist Andrew Hencic noted that domestic demand remained flat, meaning the economy still shows softness beneath headline numbers (Canadian Mortgage Trends, 2025).

This mixed picture supports a cautious pause.

2. Inflation Is Softening but Not Gone

Headline inflation has fallen near 2%, but core inflation remains slightly elevated. The BoC has repeatedly said it needs to ensure inflation is sustainably near target before committing to aggressive cuts (Bank of Canada, 2025).

3. Global and Trade Uncertainty

Trade tensions, especially with the United States, continue to create uncertainty. The BoC has emphasized that unpredictable trade policy widens the range of economic risks, making a more cautious approach likely (Bank of Canada, 2025).

4. Labour Market Weakness

Earlier in the year, Canada showed signs of underemployment and slower job creation. While things have stabilized, economists still see slack in the labour market – another reason the BoC may wait before cutting again (Reuters, 2025c).

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Could Rates Fall Again in 2026? Some Experts Say Yes

While a December pause is the base case, some analysts believe the BoC could resume cutting in 2026.

Morningstar economists recently suggested that if economic softness persists into next year, the overnight rate could drift toward 1.75% (Morningstar, 2025). This would reflect slower domestic spending, weaker business investment, and prolonged global uncertainty.

However, other forecasters argue the opposite: that the cutting cycle may already be over unless a major economic downturn emerges (Nesto, 2025).

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What About Rate Hikes? Not in the Short Term

Some long-range projections indicate rate hikes may not return until 2027 or later. Analysts at Perch note that once the economy stabilizes and inflation is firmly anchored, the BoC could gradually move back toward a higher “neutral” rate range (Perch, 2025).

But for now, experts agree:
Rate hikes are highly unlikely in 2025 or early 2026.

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What This Means for Canadians

Homeowners & Buyers

• Variable-rate mortgage holders may see stable payments for the next several months.
• Fixed mortgage rates may not fall much further, since markets have already priced in expected cuts.
• Buyers could see a short window of relative affordability before rates normalize again.

Renters & Budgeters

• Lower inflation is easing some cost pressures, but affordability challenges remain.
• A rate hold helps maintain economic stability heading into 2026.

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Bottom Line

Most experts predict the Bank of Canada will hold the policy rate at 2.25% at the December announcement. Strong GDP numbers, controlled inflation, and mixed economic signals all point toward a cautious pause.

Whether cuts resume in 2026 depends on how quickly domestic demand recovers, how inflation behaves, and how global trade risks evolve. For now, Canada is likely entering a period of rate stability after two years of volatility.

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References

Bank of Canada. (2025). Policy interest rate decision. https://www.bankofcanada.ca/2025/10/fad-press-release-2025-10-29/

Canadian Mortgage Trends. (2025). BoC expected to hold in December as GDP improves. https://www.canadianmortgagetrends.com/2025/11/boc-expected-to-hold-in-december-as-gdp-improves-but-underlying-weakness-lingers/

Morningstar. (2025). Bank of Canada may not be done cutting interest rates. https://global.morningstar.com/en-ca/economy/bank-canada-may-not-be-done-cutting-interest-rates

Nesto. (2025). Canadian mortgage rate forecast. https://www.nesto.ca/mortgage-basics/mortgage-rates-forecast-canada/

Perch. (2025). Canada interest rate forecast. https://myperch.io/canada-interest-rate-forecast/

Reuters. (2025a). Canada’s Q3 GDP surprises with 2.6% growth. https://www.reuters.com/world/americas/canadas-third-quarter-annualized-gdp-surprises-with-growth-26-2025-11-28/

Reuters. (2025b). Canadian dollar edges lower as factory downturn lengthens. https://www.reuters.com/business/canadian-dollar-edges-lower-factory-downturn-lengthens-2025-12-01/

Reuters. (2025c). Bank of Canada poised to cut rates amid economic slowdown. https://www.reuters.com/world/americas/bank-canada-poised-cut-rates-225-amid-economic-slowdown-2025-10-27/

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