Central Bank Maintains Policy Rate Amid Trade Uncertainty
The Bank of Canada announced this morning that it is holding its overnight interest rate steady at 2.25%. This decision, widely anticipated by economists, reflects a cautious approach as the central bank monitors “heightened uncertainty” surrounding global trade policies, specifically the upcoming review of the Canada-United-States-Mexico Agreement (CUSMA).
Governor Tiff Macklem emphasized that while the current policy rate remains appropriate, the Governing Council is closely watching the risks. “With heightened uncertainty, we are monitoring risks closely,” Macklem stated, noting that it is too early to predict the full economic impact of the evolving trade environment.
The decision to pause rate cuts comes as the inflation rate ticked up slightly to 2.4% in December, though core inflation measures have eased.
What This Means for Toronto Real Estate
For homebuyers and homeowners in the GTA, this “wait and see” approach brings a mix of stability and caution.
1. Mortgage Rates
- Variable Rates: With the prime rate holding steady, variable-rate mortgage holders will see no change in their payments this month. This provides a reprieve from volatility but delays any potential relief from further cuts.
- Fixed Rates: Fixed mortgage rates, which are tied to bond yields, may soften slightly. The bond market often reacts to the long-term economic outlook, which the Bank describes as “modest,” with GDP growth projected at just 1.1% for 2026. This weak growth forecast could put downward pressure on bond yields, potentially leading to slightly lower fixed rates in the coming weeks.
2. Buyer Sentiment
The hold at 2.25% removes the immediate urgency for buyers who might have been waiting for a “bottom” triggered by aggressive cuts. However, the stability allows for better financial planning. Buyers can budget with more certainty, knowing that a sudden spike is unlikely given the fragile economic growth.
The primary headwind remains the elevated unemployment rate (6.8%) and the broader economic uncertainty referenced by Macklem. Consumer confidence is key to the Toronto market, and until the “trade uncertainty” clears, some prospective buyers may remain on the sidelines.
3. Sellers and Prices
For sellers, this announcement suggests that the spring market might start slowly. Without the stimulus of a rate cut to boost affordability, purchasing power remains constrained. We expect prices to remain flat through Q1 2026, with activity concentrated in the mid-range segment where demand is most resilient.
Looking Ahead
The Bank’s next announcement will be crucial. If the trade picture clarifies and inflation stabilizes near the 2% target, we could see a resumption of rate cuts later in the year to support the sluggish economy. For now, stability is the name of the game.
Stay tuned to DreamHomeGTA for the latest market updates.
