Bank of Canada expected to leave rates unchanged in December after GDP boost
Canada’s economy avoided slipping into a technical recession in 2025’s third quarter, posting annualized growth of 2.6% and strengthening odds of a Bank of Canada interest rate hold next month.
New data released by Statistics Canada on Friday showed that headline gross domestic product (GDP) soared past forecasts, although that jump was largely spurred by an increase in defence spending and a boost to net exports.
Business spending barely budged in the quarter, while Q2 GDP was revised to a 1.8% dip – and StatCan flagged potential big revisions to the third-quarter figures because the weeks-long US government shutdown impacted data collection.
On the other hand, StatCan revised its growth estimates upward for the years between 2022 and 2024, meaning the economy likely fared better in those years than first believed.
Most economists already expected the Bank of Canada to leave rates unchanged in its final meeting of the year, scheduled for December 10, and those forecasts look unlikely to shift after the latest GDP reading.
Bank of Montreal (BMO) chief economist Doug Porter said the result would likely “quash recession chatter for now,” but still reflected signs of underlying weakness in the Canadian economy.
“For the Bank of Canada, there are many mixed messages here,” he wrote, “but the overall read is better than expected, thus more firmly putting them on the sidelines for next month’s meeting.”
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