Canada’s economy shrank more than expected in the last three months of 2025.
📉 GDP fell by 0.6% in the fourth quarter, according to Statistics Canada.
For the full year, the economy grew by 1.7%, marking the weakest annual growth since the early days of the COVID-19 pandemic.
That slowdown happened as businesses reduced their inventories, even though consumers were still spending, businesses continued investing, and governments increased spending.
🏦 Will the Bank of Canada Cut Rates?
Normally, when the economy weakens, the Bank of Canada (BoC) might consider cutting interest rates to stimulate growth.
But economists say… not so fast.
Despite the contraction, most experts believe the BoC is likely to keep rates unchanged in the coming months.
💬 What Economists Are Saying
📊 RBC’s View
Royal Bank of Canada assistant chief economist Nathan Janzen says there isn’t a strong reason for the central bank to lower rates right now. Most Canadian exports are still exempt from tariffs under CUSMA, previous rate cuts are still working their way through the economy, and government spending is helping support growth.
His base case: No additional rate cuts are needed this year.
The BoC still has room to act if things worsen, but for now, it’s staying patient.
📈 BMO’s Perspective
Bank of Montreal chief economist Doug Porter says growth in 2026 could be slightly better than last year and potentially more stable.
He notes growth is expected to be mild and the door to rate cuts isn’t completely closed but we’re not at the point where cuts are likely.
In other words: possible, but not probable.
🔍 Servus Credit Union’s Take
Servus Credit Union chief economist Charles St-Arnaud says uncertainty remains elevated.
Even if the economy improves modestly in the next quarter, he believes the current data likely won’t change the BoC’s overall outlook and the policy rate is expected to stay steady for an extended period.
🧩 What This Means
📉 Yes, the economy contracted.
📊 Yes, growth has slowed significantly compared to previous years.
🏦 But rate cuts do not appear imminent.
The Bank of Canada seems comfortable waiting to see how:
- Past rate cuts continue to filter through
- Government support plays out
- Global trade conditions evolve
For now, expect the central bank to stay on pause rather than move toward further easing.
🤔 Do we recommend locking in your Variable rate mortgage at this time?
☐ Yes
☐ No
✅ Consider It
If you currently have a variable rate that is 4% or higher, it may be worth exploring your options and asking your lender what they would offer if you lock in to a fixed rate. With ongoing geopolitical tensions and global uncertainty, markets remain volatile and future rate movements are less predictable.
That said, locking in should depend on your comfort level, timeline, and overall strategy, so reach out to us if you have questions and we’ll walk through it together.
A slowing economy does not automatically mean rate cuts, and timing matters. If you’re buying, renewing, or refinancing this year, strategy matters more than speculation.
Message us to build a plan that fits today’s market, not yesterday’s headlines.