The central bank lowered its key interest rate by one percentage point this year.

The Bank of Canada has halted its downward push on interest rates.

The central bank held its key rate on Wednesday, with economists expecting it to remain unchanged for much of next year and the next move more likely to be a hike than a cut.

The bank kept the rate at 2.25% in its final decision of 2025 after both jobs gains and economic growth have surprised to the upside recently, firming up the bank’s position that further cuts aren’t necessary at this time to boost the economy and that inflation remains in check.

“The economy is proving resilient,” said Bank of Canada governor Tiff Macklem at a press conference Wednesday, noting that while targeted sectors are feeling trade pressure, the overall tariff level on goods going to the U.S. remains low.

Unpredictability in trade however is making it harder to see the path forward, he said.

“Uncertainty remains high, and the range of possible outcomes is wider than usual,” he said.

“The volatility we’re seeing in trade and quarterly GDP make it more difficult to assess the underlying momentum of the economy.”

The comments come after the Canadian economy posted a surprise 2.6% annualized jump in the third quarter, while the unemployment rate dropped 0.4 percentage points to 6.5% in November.

Macklem said the gains reflect trade-related volatility, and that the bank expects hiring intentions will be muted and GDP growth will be moderate next year.

“The Canadian economy is going through a difficult, structural adjustment. That is going to take some time,” he said.

The bank said ongoing economic slack would help offset trade pressures to keep inflation close to its 2% target going forward.

At 2.25%, the policy interest rate is at about where it should be to balance inflation and economic growth, said Macklem.

“We think the policy rate is about right.”

Holding at this level ends a downward push started in June 2024 that brought the key rate down from 5%, including one percentage point worth of cuts this year.

Looking forward, economists expect the Bank of Canada to start raising rates either later next year or in 2027.