January 28, 2026 - No Change From the Bank of Canada
As anticipated by the majority of economists and financial analysts, the Bank of Canada left the overnight rate unchanged in today's meeting, which means there will be no change in variable rate mortgages.
Bank of Canada Governor Tiff Macklem touched base on the Bank’s outlook for the global economy, stating that the U.S. continues to exceed GDP expectations due to enormous investment in AI technology, and that China’s economy is expected to slow due to lessening domestic demand, with overall global GDP is anticipated to come in at about 3%, which exceeds expectations for Canada’s GDP.
In his speech, Governor Macklem noted that "the unemployment rate remains high at 6.80%, youth unemployment is particularly elevated, and relatively few businesses say they plan to hire more workers in coming months" which does not bode well for the Canadian economy.
Prices remain stable with the price of oil falling slightly since the last BoC meeting.
The Governor also remarked on Canada’s currency rising against that of the U.S. due to the forced devaluation of the U.S. dollar. A rising Canadian dollar increases purchasing power for Canadians, which has a deflationary effect on import prices.
Unless conditions change in the near future, it is likely that the Bank will keep the overnight unchanged in the next couple of meetings ahead.
Canada’s annual rate of inflation rate came in at 2.40% for the month of December, which was slightly higher than analysts’ expectation of 2.20%, but not enough to cause a rise in Government of Canada bond yields, which are the basis for fixed Canadian mortgage rates.
Inflation on most items were low, notably gasoline, which saw a decrease of 13.80% year over year, and energy in general, which saw a decrease of 8.80%. The price of energy has a massive impact on overall inflation due to its influence on shipping and manufacturing costs.
Food prices have continued to rise at a shocking pace. December’s numbers showed Food inflation coming in at 6.20% year over year.
Rising food prices are not only detrimental to household budgets, but the high cost of food has caused Canadians to forego purchases of non-essential items which is having a huge impact on revenue for retailers outside of the grocery business, which will eventually lead to further declines in the Canadian economy.
Food prices are likely to continue rising going forward based on the lack of focus the Federal Government has placed on this issue. Simply introducing a “grocery code of conduct,” school food programs, and reducing inter-provincial trade barriers will not bring prices down. As the price of imports continue to rise, more focus must be placed on promoting innovation in food production to increase domestic production in a country with such a short outdoor growing season.
Overall however, with inflation still coming in between the Bank of Canada’s 1-3% target rate, the number is low enough to allow government bond yields to remain at current levels with the expectation of declining yields going forward, and it also means that we will not see an increase by the Bank of Canada any time soon.
January 5, 2026 – Venezuela and Interest Rates
On weekend of January 3rd, the U.S. conducted an operation that removed the leader of Venezuela. Since markets were closed over the span of the weekend, it was not until Monday that we were able to see the market reaction to the move.
The impact of the event on markets has been low, with stock markets rising slightly, and the price of oil rising ever so slightly, even though the prospect of larger oil output from Venezuela under new government should bring global oil prices down once infrastructure that has deteriorated over the past 25 years is brought back into production.
As you can see in the chart of the 5 year Government of Canada bond yield (the basis for 5 year fixed Canadian mortgage rates), upon opening, the yields fell quickly, followed by a day-long downward trend. Overall, this impact on yields is logical. If long term oil prices are expected to fall, inflation will fall as well, and inflation has the largest impact on government bond yields.
On top of the prospect of lower inflation, increased oil output by Venezuela could reduce Canada’s GDP due to competition. Venezuelan oil exports went from approximately 3.5m barrels per day in 1999, down to current estimates of approximately 1.1m barrels per day in 2025. Since Venezuela has the largest oil reserve of any country, this fall in oil production was clearly the result of a bad political situation which has grown over the span of this century.
December 15, 2025 -- Inflation steady at 2.20%
Inflation statistics today showed that Canada’s overall inflation remained steady at a rate of 2.20%.
There was a notable decrease in the year over year cost of energy, specifically with gasoline as the price of oil has continued to decline since the mid-2022 due to slowing demand caused by reduced consumer spending on travel and manufactured goods.
Food prices continue to rise at uncomfortable levels with a year over year increase of 4.2% while shelter costs are beginning to stabilize due to falling mortgage rates combined with falling home prices.
Overall, low inflation will allow the Bank of Canada to keep their key interest rate unchanged, with the strong possibility of more cuts in 2026.
Government of Canada bond yields, which are the basis for fixed mortgage rates, fell on the announcement.
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December 10, 2025 - No change to the Bank of Canada Rate
The Bank of Canada maintained their rate today, which means there will be no change to variable rates. On the other side of the border, the Federal Reserve lowered their key interest rate by 0.25%.
As you can see in the chart of the 5 year Government of Canada bond yield above, which is the basis for 5 year Canadian fixed mortgage rates, the last couple of days have seen a large amount of volatility as traders bought and sold bonds based on expectations and results.
Leading up to the announcements, yields rose after 2 days of ups and downs which followed an upward spike in bond yields following the unexpected employment data released on December 5 (see article below for details).
Overall, yields finished lower for the day.
The Bank pointed to the Canadian economic growth as stronger than expected considering domestic demand remained flat in the third quarter. The Bank expects domestic demand to grow slightly in the fourth quarter while coupled with a decline in net exports. It is the opinion of the Bank that GDP growth is expected to be weak, but may pick up in 2026, although uncertainty remains high and much volatility in economies and markets is expected.
The Bank sited that “Employment has shown solid gains in the past three months and the unemployment rate declined to 6.5% in November. Nevertheless, job markets in trade-sensitive sectors remain weak and economy-wide hiring intentions continue to be subdued.”
The Bank pointed out that inflation statistics may come in higher than expected as data related to last year’s GST/HST holiday leaves the annual inflation statistics, yet they expect CPI to remain around the 2.00% level.
December 8, 2025 - Latest Employment Data, and the Impact on Fixed Rates
On Friday December 5, more surprising employment data was released, showing that Canada had added 54,000 new jobs to the Canadian economy, bringing the unemployment level down to 6.5%.
Immediately after the release of the data, Government of Canada bond yields, which are the basis for fixed Canadian mortgage rates, spiked upward as traders sold bonds due to the market expectation of unemployment rising to 7%, rather than falling to 6.5%. The upward spike clearly indicates that bond traders had not fully scrutinized the data to see what the increase in employment will actually have on the Canadian economy since it was, as Statistics Canada states in the first line of the release, “driven by gains in part-time work”. These are minimum wage positions that were “concentrated among youth aged 15 to 24.”
Many young Canadians today live in the reality of what is called “the gig economy” where young workers who have recently completed their education work 2 to 3 part time jobs to either make ends meet or to save for the possibility of one day having enough for a down payment on a home. One individual working 3 part-time jobs distorts the statistics in a manner which makes it appear that 3 Canadians have employment, yet it is just one individual holding 3 jobs.
Jobs in health care and social assistance also increase, and although these consist of many full-time positions, health care and social assistance are largely government funded by taxpayer money, and do not lead to the type of growth to expand the Canadian economy.
Offsetting these gains in employment were large losses of positions in wholesale and retail trade.
As you can see in the chart, Canadian employment is still much lower than it had been in previous years, and an unemployment rate of 6.5% is certainly no reason for celebration.
Due to the increase in bond yields, fixed mortgage rates have risen since the announcement, however the overall outlook for Canadian and global economy remain the same… the price of oil continues its downward trend due to cooling consumer spending which has lessened the demand for shipping and manufactured goods, slowing GDP growth, and wage stagnation which has fallen way behind the rate of inflation over past years.
Although this will certainly provide a reason for the Bank of Canada to keep their key interest rate unchanged at this month’s meeting, further cuts by the Bank are expected in 2026. Markets are widely predicting that the Bank of Canada will be holding rates steady on December 10, so this factor should already be “baked into” the current bond yield levels, however we shall need to wait to see what happens. Aside from the Bank’s meeting on December 10, Canada’s inflation statistics will be released on December 15, which will be the next data to move bond yields.
