The Bank of Canada, citing surprisingly strong economic growth in the third quarter and signs of improvement in the labour market, has opted to keep its key lending rate at 2.25 per cent.
The Bank Rate remains 2.5 per cent, while the deposit rate stayed at 2.2 per cent.
"If inflation and economic activity evolve broadly in line with the October projection, the governing council sees the current policy rate at about the right level to keep inflation close to 2 per cent, while helping the economy through this period of structural adjustment," said a release from the Bank. "If the outlook changes, we are prepared to respond."
Despite U.S. trade protectionism, major economies worldwide continue to show resilience, although uncertainty remains high. In the U.S., strong consumption and a surge in investment in artificial intelligence helped support economic growth. Economic growth has been stronger in the European Union than expected, and in China, soft domestic demand weighed on growth.
Global financial conditions, oil prices, and the Canadian dollar were unchanged since the last policy rate announcement in October.
Canada's economy grew by 2.6 per cent in the third quarter, although domestic demand was flat. An increase in the Gross Domestic Product reflected volatility in trade. The fourth quarter will likely see growth in domestic demand, but net exports are expected to drop.
Canada's labour market also showed signs of improvement with gains in the past three months. In November, the jobless rate fell to 6.5 per cent. However, sectors vulnerable to U.S. tariffs are still experiencing weak job growth.
Inflation has been close to the Bank's target between two and three per cent for more than a year now. In October, lower gas and food prices helped suppress inflation to 2.2 per cent.
