Bank of Canada update - what today’s decision means for you (and the 3 pillars that move rates)
If you follow interest rates closely, you already know this is never about one headline number. The Bank of Canada’s decisions are driven by a mix of data, risk, and direction - and the Bank watches 3 big pillars more than anything: inflation, GDP (economic growth), and jobs.
Today’s Bank of Canada decision (January 28, 2026)
The Bank of Canada held its policy rate at 2.25% today.
That “hold” tells us something important: the Bank believes rates are currently restrictive enough to keep inflation in check, but it is not fully confident the economy is strong enough to absorb higher borrowing costs without more strain. The Bank also emphasized how uncertain the outlook remains, making future moves harder to predict than usual.
So where do we go from here? The best way to frame it is through the three pillars.
Pillar 1 - Inflation (the Bank’s primary mandate)
Inflation is the Bank of Canada’s north star because its mandate is price stability (keeping inflation low, stable, and predictable). When inflation is comfortably near target and not re-accelerating, the Bank has more flexibility to hold or eventually cut.
Right now, inflation is not flashing “emergency” in either direction. Reporting around this decision points to inflation staying around the Bank’s target area, with risks that can push prices up or down depending on what happens next (including trade-related costs and broader economic demand).
What I watch for next:
- If inflation trends stay contained, it strengthens the case for rates to remain steady (or ease later if growth weakens).
- If inflation re-accelerates, cuts become less likely and the “higher for longer” conversation returns quickly.
Pillar 2 - GDP (how the economy is actually doing)
GDP is the scoreboard for economic activity - and lately it has been uneven.
Statistics Canada reported that real GDP fell 0.3% in October 2025, after a gain in September, showing that growth has been choppy and vulnerable.
At the same time, the Bank’s own outlook (as reported alongside today’s decision) points to modest growth ahead, rather than a strong rebound.
When GDP is soft, the Bank becomes more cautious about hiking because higher rates can slow spending and investment further. That is why weak or below-trend growth often supports a “hold” posture, and sometimes opens the door to cuts if the weakness deepens.
What I watch for next:
- Consecutive weak prints (or a broader slowdown across industries) can increase the odds of eventual rate cuts.
- A surprise rebound can reduce cut expectations, even if inflation remains stable.
Pillar 3 - Jobs (labour market momentum)
Jobs are the real-world pressure test. A soft labour market impacts consumer confidence, spending, and mortgage affordability - and the Bank pays close attention to that chain reaction.
Recent official reporting and surveys suggest the labour market has been weaker and cooling, with hiring intentions not particularly strong.
When job growth is losing momentum, the Bank typically avoids unnecessary tightening because it can make that slowdown sharper.
What I watch for next:
- If job creation remains sluggish and unemployment trends higher, it supports a “rates stay put” environment and raises the probability of cuts later.
- If the job market unexpectedly heats up again, it can keep rates elevated longer than borrowers expect.
So what is the rate outlook for the next few months?
Based on today’s hold and the current mix of inflation staying near target while growth and hiring remain uneven, the most reasonable base case for the near term is:
- The Bank of Canada is likely to stay on hold in the coming months, unless inflation breaks out or the economy deteriorates faster than expected.
- Many economists have been leaning toward a long hold through much of 2026, with the caveat that the path can change quickly if growth or inflation surprises.
That is not a promise of cuts, but it does suggest that the Bank is not eager to raise rates again unless the data forces their hand.
What this means for mortgage rates (variable and fixed)
A quick reminder, because this is where many borrowers get understandably confused:
Variable-rate mortgages
Variable rates are most directly tied to the Bank of Canada’s policy rate. When the Bank holds, variable rates usually stay stable. When the Bank cuts, variable rates typically move down. When the Bank hikes, variable rates usually move up.
Fixed-rate mortgages
Fixed rates are influenced more by bond yields and market expectations, not only by the Bank’s overnight rate. That means fixed rates can move before the Bank moves, and sometimes in the opposite direction if markets shift quickly.
With the Bank in “wait and see” mode, fixed rates can still fluctuate based on inflation reports, GDP surprises, and global risk headlines.
What this means for borrowers
For borrowers, today’s hold signals a more stable rate environment near-term, which is helpful for planning payments and renewal decisions with fewer sudden surprises.
If your mortgage renews in 2026, now is the time to plan
If you have a renewal coming up in 2026, you do not need to guess where rates will be on renewal day. You can focus on what you can control: preparation, options, and timing.
Here are the most useful steps:
1) Review your renewal timeline early
Many lenders allow rate holds and early renewal conversations well before maturity. Starting early gives you flexibility if rates improve - and protection if they do not.
2) Stress-test your payment comfort
Even if rates fall later, qualify and budget based on conservative assumptions so you are not forced into a decision under pressure.
3) Choose the “lowest cost,” not the “lowest rate”
The best mortgage is not always the one with the lowest advertised rate. Penalties, restrictions, prepayment options, and portability can change your total cost dramatically, especially if you might sell, refinance, or break early.
4) If you are in a variable now, run the scenarios
Some borrowers benefit from staying variable if they believe cuts are coming. Other borrowers benefit from converting to fixed if payment stability is the priority. The right answer depends on your budget, timeline, and risk tolerance.
5) Make sure your mortgage still fits your life
If your income has changed, your family has grown, or your goals have shifted (renovations, debt consolidation, investment plans), your mortgage strategy should shift too.
If you have a mortgage renewal in 2026, this is an ideal window to review your options early, map out payment scenarios, and make sure you are positioned to choose the best mortgage for your total cost - not only the headline rate.
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