Bank of Canada Monetary Policy Report – January 2026 Outlook

# Bank of Canada Monetary Policy Report (MPR) – January 2026 Outlook

Key Summary

In its January 28, 2026 MPR, the Bank of Canada held its policy rate at 2.25% and projected GDP growth of 1.1% in 2026 and 1.5% in 2027. U.S. tariffs continue to suppress demand for Canadian goods, weighing on employment, productivity, and living standards. Inflation, however, remains stable near the 2% target.

Details

The Bank of Canada's Monetary Policy Report released on January 28, 2026 ([MPR January 2026](https://www.bankofcanada.ca/publications/mpr/mpr-2026-01-28/)) assessed that the Canadian economy is actively adjusting to U.S. tariffs and a reshaping global trade environment.

GDP Growth Outlook

2026: Annual average growth of 1.1% (broadly in line with the October forecast)

2027: Annual average growth of 1.5%

Drivers of subdued growth: slowing population growth combined with trade realignment impacts

Inflation Outlook

Average CPI inflation for 2025: 2.1%

Remained within the 1–3% target band for two consecutive years

Core inflation: declined from approximately 3% in October 2025 to roughly 2.5% in December 2025

Inflation expected to remain near 2% throughout the projection horizon

Downward pressure from excess supply broadly offset by upward pressure from trade realignment

Policy Rate Decision

Policy rate held at 2.25% ([Rate Decision](https://www.bankofcanada.ca/2026/01/fad-press-release-2026-01-28/))

The Governing Council noted that uncertainty remains unusually elevated

Key Risk Factors

1. U.S. tariffs: Sustained reduction in U.S. demand for Canadian goods 2. CUSMA review: Identified as a significant risk factor 3. Geopolitical risks: Remain broadly elevated 4. Trade unpredictability: Uncertainty surrounding future trade agreements continues to dampen economic activity

March 2026 Decision

On March 18, 2026, the Bank of Canada announced its next rate decision ([March Opening Statement](https://www.bankofcanada.ca/2026/03/opening-statement-2026-03-18/)).

Summary of Governing Council Deliberations

The deliberations summary for the January 28 decision, released in February 2026 ([Summary of Deliberations](https://www.bankofcanada.ca/2026/02/summary-governing-council-deliberations-fixed-announcement-date-of-january-28-2026/)), provided detailed insight into the Council's decision-making process.

Key Figures

Policy rate: 2.25% (held)

2026 GDP forecast: 1.1%

2027 GDP forecast: 1.5%

Average CPI inflation (2025): 2.1%

Core inflation (December 2025): ~2.5%

Inflation target band: 1–3%

Q4 2025 GDP growth: -0.1%

Full-year 2025 GDP: +1.3%

Rise Partners Implications

The Bank of Canada's rate hold at 2.25% signals limited room for further cuts in the near term. Korean companies investing in Canada can expect financing costs to remain broadly stable at current levels, creating a favorable environment for medium-term investment planning.

GDP growth of 1.1% alongside stable inflation near 2% defines a "low-growth, low-inflation" environment — conditions that favor value-oriented business models. Rise Partners recommends that client companies prioritize strategies to strengthen price competitiveness.

Given that the CUSMA review is acknowledged by the Bank of Canada itself as a key risk, businesses should actively pursue trade diversification strategies leveraging the Canada-Korea Free Trade Agreement (CKFTA).

--- Source: https://www.bankofcanada.ca/publications/mpr/mpr-2026-01-28/