The Bank of Canada kept its target overnight interest rate unchanged at 2.25%, a 25 basis point increase, as expected, after three consecutive rate cuts. It also maintained the key interest rate for banks at 2.50% and the deposit rate at 2.20%.

The Bank’s report stated that economic growth unexpectedly rose to 2.6% in the third quarter, with expectations of a weaker performance in the fourth quarter. The labor market showed some signs of improvement, and the unemployment rate fell to 6.5% in November.

The consumer price index (CPI) inflation rate slowed to 2.2% in October, as gasoline and food prices declined at a slower pace. Inflation has remained close to the Bank’s 2% target for over a year, while core inflation has remained between 2.5% and 3%. The Bank expects inflation to rise due to the effects of the tax relief on goods and services, but it will remain close to the target.

If inflation and overall economic activity develop in line with October’s expectations, the Board believes the current interest rate is appropriate to keep inflation close to 2%. If expectations change, the Board is prepared to respond, and the Bank will focus on ensuring Canadians’ confidence in price stability during this period of global turmoil and supporting economic growth while ensuring inflation is under control.