The C.D. Howe Institute’s Monetary Policy Council is recommending that the Bank of Canada keep its overnight rate at 2.25 per cent at its next announcement and hold that level through 2026. The call reflects persistent core inflation, evolving GDP revisions and lingering uncertainty around economic potential.
BNN Bloomberg spoke with Jeremy Kronick, director of financial and monetary policy and vice-president of economic analysis and strategy at the C.D. Howe Institute, about why the council believes weak demand, strong labour data and unclear disinflation signals support keeping policy steady for now.
Key Takeaways
- The C.D. Howe Institute’s Monetary Policy Council recommends the Bank of Canada hold its overnight rate at 2.25 per cent at upcoming meetings and through 2026.
- Members cite persistent core inflation and new GDP revisions as reasons to avoid further rate cuts.
- Strong labour-market data and uncertainty around economic potential support leaving policy unchanged.
- Council members say premature cuts could risk inflation reaccelerating and limit future policy flexibility.
- While views vary within the council, the median recommendation consistently favours holding rates steady.
Read the full transcript below:
ANDREW: Investors think the Bank of Canada won’t make any change to interest rates tomorrow. Our guest says the central bank, sure enough, should make that decision and hold rates right through 2026. We’re joined by Jeremy Kronick, director of financial and monetary policy and vice-president of economic analysis and strategy at the C.D. Howe Institute. And Jeremy, I probably should be precise here. So this came from the C.D. Howe Institute’s Monetary Policy Council, which includes distinguished members, including the top economists of the six big banks. Who else is on that council?
JEREMY: Yeah, that’s right. The Monetary Policy Council is made up of, as you said, the chief economists of the big six banks, as well as six of the leading academic economists in the country. We meet the Thursday before the Bank of Canada’s announcements, and we vote on what we think the bank should do. And, you know, those votes can differ for the banks’ chief economists, at least as to what they forecast, but in this case, the sentiment seems to match the way the markets feel.
ANDREW: And the committee also thinks that, really, there should be no change in interest rates right through next year.
JEREMY: Yeah. I mean, I think there’s a lot of uncertainty at play — uncertainty in the data. We saw recent revisions to GDP, so lots can change between now and next year. When we vote, we vote this time for what we think the Bank of Canada should do the following week, six weeks ahead at their next fixed announcement date, six months out and a year ahead. So we vote on those conditions at any particular meeting. But again, that could change over time. The focus right now is obviously what the bank is going to do next week.
ANDREW: Why not just go on cutting interest rates, though? Because we do have this threat to our economy with the U.S. trade barriers.
JEREMY: Yeah. So I think there are a couple of things at play. One, obviously, the GDP revisions we saw the other day put some doubt as to what the state of the economy’s potential is. And we see core inflation has been stubbornly at three per cent for a while now, so we haven’t brought that back down to two per cent like we have with headline inflation. One school of thought might be that these revisions we saw in actual GDP — if potential is what we thought it was and actual GDP is higher — that might be what caused inflation to remain stubbornly above the two per cent target and at the top end of the bank’s one- to three-per-cent range. With that, and with the overnight rate at 2.25 sitting at the lower end of the neutral-rate range for the Bank of Canada, in some ways it makes sense to wait and see how things evolve from here.
ANDREW: I guess there is the old “powder dry” thing. If you cut rates right down to the bare bones, you don’t have that tool available anymore?
JEREMY: Well, that’s right. And we just came out of a burst of inflation for a year or two. So I think we’re probably a little hesitant to lower rates now, see that inflation come to fruition, and have to bring it back down again. And again, with the core inflation measures the way they are and how stubborn they’ve been, I think there’s a lot of justification — alongside this new data — to hold off. And we should also talk about the labour-market data, which was also strong. So with all of that, it makes a lot of sense to leave rates where they are.
ANDREW: And tell us, has the C.D. Howe panel been in agreement with the Bank of Canada over the past year? Or do they think the Bank of Canada has cut too much?
JEREMY: Yeah. So I think for the most part, the council has voted in advance for what the bank ended up doing the following week. That’s been fairly consistent, and that’s probably the one that people track the most. The stuff where we look further out changes so much with the data that it’s hard to say. But if we look at the following week’s announcement, it has followed pretty closely what the group has suggested. But I should note that we publish the votes of all 12 members, and members don’t necessarily agree with each other. It’s not a consensus process — it’s a median vote that ends up ruling the day. There’s a lot of variance among members, some more so than others. I think there was a lot more agreement this time around, but there have definitely been cases where members viewed the outlook differently.
ANDREW: We’d better jump. Jeremy, thank you very much indeed.
JEREMY: Okay, thanks for having me.
ANDREW: Jeremy Kronick, director of financial and monetary policy and vice-president of economic analysis and strategy at the C.D. Howe Institute.
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This BNN Bloomberg summary and transcript of the Dec. 9, 2025 interview with Jeremy Kronick are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
