Stop Watching US News: Canada is Ahead of the Curve

If you're following the news, you're likely hearing talk about the US Federal Reserve's changes to interest rates. While US decisions often influence Canada, in this case, we are already ahead of the curve.

Dec 10/25 announcements of both Canadian and US Central Banks confirm the divergence and provide a clear signal for Canadian borrowers. The Bank of Canada Has Found the Floor.

The Bank of Canada (BoC) announced its final policy decision of the year December 10, 2025:

• Current Rate: The Bank of Canada maintained its target for the overnight rate at 2.25%

  
  

• The Message: Governor Tiff Macklem stated the current policy rate is at "about the right level" to keep inflation near the 2% target while the economy navigates a "structural adjustment"

  
  

• The Rationale: The BoC acknowledged the economy is proving "resilient overall" and has seen stronger-than-expected GDP and solid employment gains

  
  

• The Consensus: Expert forecasts, including commentary from TD Economists and other analysts, suggest the BoC is likely done with rate cuts and will hold steady at 2.25% throughout 2026. This reinforces the view that the significant interest rate drops are behind us.

  
  

  

This confirms we have hit the floor. Further major rate cuts are not expected by the majority of market participants. Canada is Still Ahead of the Curve.

Normally, Canadian and US overnight rates track closely. With the Dec 10 announcements, the wide gap narrowed slightly:

• The US Federal Reserve cut its benchmark rate by 25 basis points (bps)

  
  

• The US Fed's new target range is now 3.50% to 3.75%

  
  

• The Canadian rate is 60% the rate of the US Federal Reserve's upper target range.

The US is continuing an easing cycle to stabilize its labour market and combat inflation, while Canada's cycle of cuts is pausing.

✅ What This Means to You: Stop Waiting

The primary takeaway for Canadian mortgage holders is urgency. The time to wait for the "perfect lowest rate" to buy, refinance, or renew your mortgage may be over.

• If you have been holding off, you are likely at or near the best available rates for the foreseeable future

  
  

• The market consensus is that rates will not drop further throughout 2026, with a potential small hike only expected around the third quarter of 2027.