On January 28, 2026, the Bank of Canada announced its first interest rate decision of the year, electing to maintain the target for the overnight rate at 2.25%. This decision marks the second consecutive hold for the central bank, following a similar pause in December 2025. The Bank Rate remains at 2.5%, while the deposit rate is positioned at 2.2%.
The decision to maintain current levels suggests that the Governing Council views the current monetary policy as appropriate for the present economic climate. According to the Bank of Canada, the economy is currently evolving broadly in line with previous projections, despite a backdrop of global trade uncertainty and shifting geopolitical risks.
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Why the Central Bank Chose a Rate Hold
Several economic factors influenced the decision to keep rates steady. The central bank is balancing the need to support a cooling economy while ensuring inflation continues its path toward the 2% target.
- Inflation Trends: While headline inflation saw a slight uptick to 2.4% in late 2025 due to the unwinding of temporary tax measures, core inflation continues to show signs of softening.
- Labour Market Cooling: The national unemployment rate currently sits at 6.8%. Hiring has slowed significantly, and the central bank noted that the labour market remains “soft” with elevated levels of slack.
- Trade Uncertainty: A primary concern cited in the Monetary Policy Report is the impact of U.S. trade restrictions and tariffs. These factors have buffeted Canadian exports and caused a stall in GDP growth during the final quarter of 2025.
- U.S. Economic Influence: While the U.S. economy continues to grow, driven by consumer spending and AI-related investment, the resulting trade friction creates a complex environment for Canadian policymakers.
Impact on Mortgages and Consumer Loans
For many Canadians, the Bank of Canada’s decision has a direct and immediate impact on household budgets, particularly regarding debt servicing costs.
Variable-Rate Mortgages and HELOCs
Borrowers with variable-rate mortgages or Home Equity Lines of Credit (HELOCs) will see no immediate change in their monthly payments. Because these products are tied directly to the prime rates of commercial banks—which in turn track the central bank’s overnight rate—the cost of borrowing remains status quo for now.
Fixed-Rate Mortgages
Fixed-rate mortgage holders are influenced more by the government bond market than the overnight rate. Bond yields have remained relatively stable in early 2026, meaning that those looking to renew or sign a new fixed-rate mortgage are unlikely to see dramatic shifts in offered rates in the immediate wake of this announcement.
Personal Loans and Credit Cards
Interest rates on personal loans and lines of credit are expected to remain steady. Consumers are encouraged to maintain their current repayment strategies, as the “extended pause” signaled by the bank suggests that significant rate cuts may not be on the horizon in the short term.
What Savers and GIC Investors Need to Know
For individuals focused on growing their savings, a rate hold provides a degree of predictability.
High-interest savings accounts (HISAs) and daily interest accounts are likely to maintain their current yields. Those holding Guaranteed Investment Certificates (GICs) will find that rates have stabilized. While GIC returns are lower than the peaks seen in 2024, they still offer a reliable way to outpace the current inflation rate of approximately 2.2%.
The Outlook for the Remainder of 2026
The Bank of Canada has indicated that it is prepared to adjust policy if economic conditions shift. However, current market sentiment suggests a “wait-and-see” approach. The central bank is monitoring how domestic demand picks up and how the economy adjusts to the new global trade landscape.
Economists from major financial institutions suggest that the policy rate could remain at 2.25% for much of the year, provided inflation stays near the 2% target. The next scheduled interest rate announcement is set for March 18, 2026, where the bank will again assess the impact of international trade developments and the health of the Canadian labour market.
FAQs About the January 2026 Bank of Canada Decision
What is the current Bank of Canada interest rate?
The current target for the overnight interest rate is 2.25%, as of the January 28, 2026, announcement.
Will my mortgage payments decrease after this decision?
No, because the Bank of Canada held the rate steady, payments for variable-rate mortgages and HELOCs will remain unchanged.
When is the next Bank of Canada interest rate announcement?
The next announcement is scheduled for March 18, 2026.
Ben Lee is a content writer specializing in government schemes and public benefit programs, delivering clear and up-to-date information to help readers understand eligibility, payments, and policy changes.