Canada Interest Rate Forecast 2025-2029
Last Updated: December 10, 2025
CURRENT INTEREST RATE FORECAST FOR 2025: 2.25% (last updated December 10, 2025)
For more information about the 2025 Bank of Canada rate announcement schedule, read more here 👈
Key Takeaways (updated December 2025)
- On Wednesday, December 10, 2025, the Bank of Canada announced that it will be holding its rate, keeping the policy rate at 2.25%.
- A decelerating GDP, an uptick in core inflation and a reduced unemployment rate all support the decision to hold rates.
2025 Predictions (updated December 2025)
Will Interest Rates in Canada Go Down in 2025?
On Wednesday, December 10, 2025, the Bank of Canada announced that it will be holding its rate, keeping the policy rate at 2.25%.
Commentary from Perch’s CEO and Principal Mortgage Broker, Alex Leduc:
When is the next Bank of Canada rate increase and what can I expect?
The current market overnight interest rate forecast for the remainder of 2025 is:| Variable Rate Interest Forecast 2025 to 2030 (as of December 2025) | |
|---|---|
| Date | 5-year variable rates |
| 12/31/25 |
3.60% |
| 6/30/26 |
3.59% |
| 12/31/26 |
3.58% |
| 6/30/27 |
3.75% |
| 12/31/27 |
3.85% |
| 6/30/28 |
3.96% |
| 12/31/28 |
4.00% |
| 6/30/29 |
4.08% |
| 12/31/29 |
4.12% |
| 6/30/30 |
4.20% |
| 12/31/30 |
4.32% |
| 12/31/30 |
4.27% |
How will the latest Bank of Canada interest rate announcement impact your monthly mortgage payments?
What is the interest rate forecast for 2025 in Canada? (updated December 2025)
Commentary from Alex Leduc, Principal Mortgage Broker and CEO of Perch:
What is CPI and how does it affect the Canada interest rate forecast?
CPI stands for consumer price index and it is the measure of average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is mainly used to measure inflation. A rising Consumer Price Index (CPI) would prompt the central bank to raise interest rates. The CPI basket includes 8 main categories of goods and services: Food, Shelter, Household operations, Clothing, Transportation, Health, Recreation, and Alcoholic beverages. CPI data is reported for various geographic areas, including Canada, provinces, and select cities, such as Whitehorse, Yellowknife, and Iqaluit.
What affects the Bank of Canada’s interest rate forecast?
We look at some of the core factors that the Bank is monitoring to gauge which direction they are likely to go. In this case, all indicators seem to indicate they will hold.
- Real GDP Growth: GDP growth in Q2 of 2025 slowed to 1.2% (Source: Trading Economics). The Bank of Canada is expecting GDP growth of 0.8-1.6% in 2025 and -0.2-1.4% in 2026. This is below expectations and would support a cut. (Source: Bank of Canada)
- Inflation: Core inflation (year over year) in Sept was 2.8% (vs 2.6% in Aug), above the Bank’s 2% inflation target and is stubbornly staying in the high 2s. This would support a hold. (Source: Trading Economics)
- Unemployment: Remained stable at 7.1% in Sept (0.5% higher than 1 year ago). On an absolute level, this is above what is deemed to be maximum sustainable employment and would justify a cut. (Source: Trading Economics)
What is the Canadian prime rate?
The prime rate is what major banks and financial institutions in Canada use to set interest rates for loans and lines of credit which also include variable rate mortgages.
Is prime rate the same as mortgage rate?
The prime rate is not the same as your mortgage rate. A prime rate is the base cost of borrowing from which lenders start to determine interest rates on mortgages, personal loans, credit loans or other financial products. In general, the prime rate mostly affects variable rate mortgages. Your mortgage rate is the interest rate you are expected to pay on any borrowed money.
What are the interest rate predictions from the banks?
CIBC
RBC
RBC expected the Bank of Canada to hold its policy rate this week, a decision that should be far less contentious than the one facing the Federal Reserve. After cutting rates in October, the BoC signaled that the current level is “about the right” setting to keep inflation on a steady path while supporting growth through an uncertain environment.
RBC notes that upcoming Canadian trade data for September will be key for validating last week’s Q3 GDP figures. Export volumes would need to rise 3.4% and import volumes fall 3.1% to match the reported details. Equally important will be U.S. trade data confirming whether CUSMA exemptions continued to bolster Canadian exports south of the border.
Scotiabank
Scotiabank Economics expected the Bank of Canada to maintain its 2.25% policy rate into the new year before shifting toward roughly 50 bps of tightening in the second half of 2026—potentially earlier and larger than markets currently anticipate. This outlook, held since September, aligns with recent market moves. Scotia projects a gradual flattening of Canada’s base rates curve, with the short-term Canada–U.S. yield gap narrowing as anticipated Federal Reserve cuts support an appreciating Canadian dollar. Meanwhile, the longer-term U.S. yield advantage over Canada is expected to diminish.
Still, Scotia emphasizes that 2026 carries as many uncertainties as 2025, calling for nimble risk management rather than fixed forecasts. Their year-end curve expectations point to a rally in the Canada 10-year yield early in the year, followed by cheapening toward an estimated equilibrium near 3.75%, with risks tilted to the upside.
TD Canada
TD Economics expected the Bank of Canada to hold rates steady at todays final policy announcement of the year—a call reinforced by the latest employment report. More crucial will be the Bank’s guidance. TD anticipates that Governing Council will acknowledge recent improvements in employment but also underscore persistent labour-market slack and elevated uncertainty, particularly as Canada and the U.S. head into complicated USMCA renegotiations.
TD also expects the Bank to reiterate that inflation should continue to ease over time. Overall, TD projects that the BoC will maintain its current policy stance through 2026 while monitoring for clearer signs of a sustained economic recovery.
BMO
BMO noted that there was complete certainty the Bank of Canada will hold rates during todays BoC announcement, a decision made even more straightforward by stronger-than-expected jobs data. Looking ahead to next year, the renewed economic momentum has encouraged more hawkish calls for potential rate hikes. BMO highlights that most core inflation measures are running between just above 2.5% and 3.0% year over year, with food prices rising again—factors that complicate the policy outlook.
Bond markets have responded accordingly, with yields moving higher on shifting expectations for the BoC and broader global pressures. Notably, the key five-year yield surged nearly 30 basis points this week, climbing above 3% for the first time since August.
Alex Leduc
Alex Leduc is Founder and CEO at Perch. Prior to starting Perch, he worked in the real estate sector for 8 years in corporate finance, strategy and analytics roles. He is currently a Technical Advisory Committee Member of the Financial Services Regulatory Authority of Ontario (FSRA) and Co-Chair of the Canadian Lenders Association Mortgage Roundtable. Alex is a graduate of Ivey Business School from Western University and a CFA Charterholder. LinkedIn