Latest bank decision: At its meeting on 15 May, the Central Bank decided to lower the target for the overnight...
Target for the Overnight Rate in Canada
Over the last decade, Canada's central bank policy rates experienced cycles of reduction and increase. The rates were lowered to near-zero during the COVID-19 pandemic to support the economy. As the economy began recovering, the central bank increased rates to manage inflationary pressures. From 2024, a rate cut cycle began in response to declining inflation, rising unemployment and mild economic growth.
The Target for the Overnight Rate ended 2022 at 4.25%, up from the 0.25% end-2021 value, and significantly higher than the reading of 1.00% a decade earlier. For reference, the average policy rate in Major Economies was 3.50% at the end of 2022. For more interest rate information, visit our dedicated page.
Canada Interest Rate Chart
Note: This chart displays Policy Interest Rate (%) for Canada from 2024 to 2018.
Source: Macrobond.
Canada Interest Rate Data
| 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|
| Target for the Overnight Rate (%, eop) | 0.25 | 0.25 | 4.25 | 5.00 | 3.25 |
| 3-Month T-Bill (%, eop) | 0.06 | 0.16 | 4.23 | 5.04 | 3.16 |
| 10-Year Bond Yield (%, eop) | 0.71 | 1.49 | 3.30 | 3.11 | 3.23 |
Bank of Canada keeps rates steady in April
Latest bank decision: At its meeting on 16 April, the Bank of Canada kept its target for the overnight rate at 2.75%, following 225 basis points of rate cuts since mid-2024.
External uncertainty underpins hold: The decision to keep monetary policy on hold was driven by a desire the assess the impact of past rate cuts, in a context of extremely elevated uncertainty surrounding the GDP and inflation outlooks due to the trade conflict with the U.S. Uncertainty was so high that the Bank presented two different economic outlooks, each underpinned by different assumptions surrounding U.S. tariffs; one outlook saw the economy flatlining in H1 before rebounding, while the other forecast a recession.
Rate cuts to resume: The Bank reiterated that monetary policy would not be able to offset the economic impact of a trade war and must remain focused on tackling inflation; this hints that the Bank’s response to further tariffs may not be large interest rate cuts. Most panelists see more monetary easing this year, of between 25 and 100 basis points, though several panelists expect rates to remain unchanged through end-2025.
Panelist insight: On the outlook, TD Economics’ James Orlando said: “Market pricing for a cut in June jumped [on the day of the Bank’s meeting], with about 50 bps in cuts expected over the remainder of 2025. This makes sense to us. Canada may have received a lower effective tariff rate than other countries, but the damage has already been done. Canada's economy has started to show signs of weakness, which we think will continue over the coming months.”
Consensus Forecasts and Projections for the next ten years
How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Canadian interest rate projections for the next ten years from a panel of 23 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Canadian interest rate.
Download one of our sample reports to visualize what a Consensus Forecast is and see our Canadian interest rate projections.
Want to get access to the full dataset of Canadian interest rate forecasts? Send an email to info@focus-economics.com.
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