Canada Prime Rates

Bank of Canada Holds Policy Rate, Keeping the Prime Rate Steady as Inflation Remains Elevated Amid Trade Uncertainty

With the Bank of Canada holding its policy rate at 2.25%, the prime lending rate remains unchanged at 4.45%. Inflation has moved back above the Bank’s 2% target in recent months, limiting the case for near-term rate cuts. At the same time, weak export growth and ongoing trade uncertainty with the United States continue to weigh on the economy. For now, the Bank appears inclined to keep rates steady while it assesses whether inflation pressures ease or become more persistent.

Bank of Canada Holds Policy Rate and Prime Rate Steady

• After cutting interest rates through 2024 and 2025, borrowing costs are now much lower than they were two years ago. These rate cuts have helped support household spending and business activity as economic growth has slowed.
• Inflation has risen above the Bank of Canada’s 2% target in recent months. While some price increases reflect temporary factors, inflation remains broad enough to warrant caution and has not yet clearly returned to a comfortable range.
• The removal of the consumer carbon price is putting noticeable downward pressure on inflation, but this effect is being partly offset by higher costs in areas such as food and some services.
• Lower energy prices and easing housing-related inflation have helped slow overall price growth, but these improvements have not been sufficient to fully offset other inflation pressures facing households.
• Economic growth has been uneven. After a strong rebound in the third quarter of 2025, momentum appears to have slowed again toward the end of the year as exports outside of precious metals remained weak and businesses stayed cautious.
• The job market has improved modestly, with employment rising in recent months. However, unemployment remains relatively high, and many employers report limited plans to hire more workers.
• Trade tensions with the United States continue to cloud the outlook. US tariffs have reduced demand for some Canadian exports and discouraged business investment, adding to economic uncertainty.

Overall, the Bank of Canada is facing a difficult trade-off. Inflation remains above target, which argues against cutting rates too quickly, while parts of the economy are still under pressure from trade disruptions and slowing growth. Holding the policy rate steady keeps the prime rate unchanged for now and allows the Bank to see whether inflation moves decisively lower or proves more stubborn. For borrowers, this means rates tied to prime — including variable-rate mortgages and lines of credit — are likely to remain stable in the near term unless inflation or economic conditions shift meaningfully.

The Prime rate in Canada is currently 4.45%. The Prime rate is the interest rate that banks and lenders use to determine the interest rates for many types of loans and lines of credit. These can include credit cards, HELOCs, variable-rate mortgages, car and auto loans, and much more. If you have any of these loans, changes in the prime rate will also change your debt payments and thus your GDS and TDS ratios.