Overnight rate

In 2025, the overnight rate in Canada is projected at 2.44%, reflecting a significant decline from the cycle highs reached earlier in the period. After peaking at 5% in July 2023 to combat persistent inflation, the Bank of Canada shifted to an accommodative stance as inflation eased and economic growth slowed. The monetary policy environment thus prioritized supporting domestic demand, mitigating household debt burdens and fostering overall economic stability. These adjustments were guided by recent macroeconomic indicators, subdued population growth and ongoing external risks such as global trade and tariff uncertainties.

Between 2020 and 2025, the overnight rate experienced historically pronounced fluctuations. The Bank of Canada slashed rates to 0.25% in early 2020 in response to pandemic-induced economic shocks, then maintained these lows until late 2021 as the economy began to stabilize. Facing mounting inflationary pressures, the central bank implemented an aggressive tightening cycle, steadily increasing the rate to rein in price growth. Tightening culminated at the 2023 peak of 5%, the highest level in more than twenty years. As the effects of restrictive policy translated into cooling inflation and weaker GDP growth through 2024, the Bank reversed course, executing a series of rate cuts that saw the overnight rate fall back below 3%. Throughout this period, influences such as market liquidity, global supply shocks and shifting consumer sentiment shaped the broader interest rate environment. Domestic considerations, including elevated mortgage costs and high household indebtedness, played critical roles in motivating a transition from restrictive to stimulative monetary policy.

From 2020 to 2025, macro trends informing overnight rate movements included rapid changes in economic activity associated with the pandemic, abrupt swings in inflation, central banks' evolving policy frameworks, and persistent global uncertainty. These factors combined to create a historically volatile rate environment, with monetary authorities seeking to balance price stability, financial system resilience and growth.