The Bank of Canada held its benchmark rate at 2.25% this morning. No surprise there. Markets had priced in a 93.5% probability of a hold.

But the real news wasn't the pause. It was the language.

Governor Tiff Macklem said the rate is now "at the lower end of the neutral range" and provides "some support" for the economy. Translation: this is the floor. The cutting cycle that started in June 2024 and brought rates down from 5% is over.

Anyone waiting for cheaper money to fuel a housing rebound just got a reality check.

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The Data That Changed Everything

Back in October, the Bank cut rates and signaled it might be done. Markets weren't sure. Some economists thought another cut was possible. Others started talking about rate hikes in late 2026.

Then Statistics Canada dropped GDP revisions that changed the entire picture.

Real GDP growth was revised up by roughly half a percentage point for 2022, 2023, and 2024. That doesn't sound like much until you realize it means the Canadian economy was stronger than anyone thought heading into the current trade disruptions.

Macklem was direct about this. The revisions "alter our assessment of potential output," he told reporters. In other words, the Bank had been worried about an economy that was weaker than it actually was.

The revised numbers also paint a different picture on productivity. Previous data suggested productivity had fallen off a cliff. The revisions show it's been treading water instead. Still not great, but not the "break the glass" emergency the Bank had described.

GDP per capita, which has been declining since 2022, also looks slightly better after the revisions. It's still down from 2022 levels, but higher than pre-pandemic numbers and tracking sideways rather than falling.

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What "Structural Adjustment" Actually Means

Macklem used the phrase "structural adjustment" repeatedly today. He used it in October too. And he's going to keep using it because it's doing a lot of work.

"This is more than a cyclical downturn, it's a structural transition," Macklem said in his opening statement.

That's economist-speak for permanent changes to how the economy functions. Not a temporary slowdown that monetary policy can smooth out. A fundamental reshaping driven by U.S. trade policy.

Steel, aluminum, autos, and lumber have been hit hard by tariffs. Those sectors are shrinking. Business investment across the board is weak because companies don't know what trade policy will look like next quarter, let alone next year.

The upcoming review of CUSMA (the Canada-U.S.-Mexico trade agreement) adds more uncertainty. Nobody knows what comes out of that negotiation.

Macklem was blunt about what monetary policy can and can't do. It can't help companies find new markets. It can't help them reconfigure supply chains. It can't target specific sectors that are getting hammered.

What it can do is try to prevent spillovers from those hard-hit sectors to the rest of the economy. And it can help the overall economy adjust to higher costs and lower efficiency.

But "increased trade friction with the United States means our economy works less efficiently, with higher costs and less income," Macklem said. That's not something lower interest rates fix.

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The Inflation Picture

Inflation is sitting at 2.2%, right on target. Core measures are running between 2.5% and 3%. The Bank thinks underlying inflation is around 2.5%.

That's contained, but not falling. And the Bank expects inflation to be "choppy" in the near term because of base effects from last year's GST holiday.

The good news is that businesses are having trouble passing higher costs to consumers. Demand is weak enough that price increases don't stick. That's keeping inflation pressures contained even as trade disruptions add costs.

The bad news is that weak demand means weak growth. The Bank expects GDP growth to be soft in Q4 before picking up modestly in 2026.

Three straight months of strong employment data haven't changed the Bank's view. Macklem downplayed those numbers, pointing to "muted hiring intentions across the economy" and continued weakness in trade-sensitive sectors.

"The Canadian economy is going through a difficult structural adjustment that is going to take some time," he said.

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What This Means for Real Estate

The housing market got nine rate cuts between June 2024 and October 2025. Those cuts brought the policy rate from 5% down to 2.25%, which translates to prime rates around 4.45%.

That's significant stimulus. Variable rate mortgages are cheaper. Fixed rates have come down too, though not as much because they track bond yields.

But that stimulus is done. The Bank made it clear today that 2.25% is where rates stay unless something material changes.

Financial markets had started pricing in the possibility of rate hikes in late 2026. Macklem pushed back on that, saying the Bank won't put policy on a timeline. But he also didn't rule it out.

"What markets can count on is we're going to take our decisions one at a time, based on the best available information," he said.

For buyers, this means the affordability gains from falling rates are over. What you see now is what you get. Mortgage rates won't drop significantly from here unless the economy takes a major hit.

For sellers, it removes one uncertainty. Rates aren't falling further to bring more buyers off the sidelines. But they're also not rising to push buyers away. The market settles at this new baseline.

For investors, it confirms that cheap credit won't be inflating asset prices anytime soon. Returns come from fundamentals, not rate-driven price appreciation.

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The Bigger Economic Context

Prime Minister Mark Carney's first budget committed $280 billion over five years for infrastructure, productivity measures, defense, and housing. That pushed the deficit to $78.3 billion.

Macklem said he expects those spending increases and the push for private investment to contribute to both supply and demand growth. That's important because it suggests government fiscal policy is now carrying more of the load for supporting the economy.

The Bank has done what it can with monetary policy. Rates are at the bottom of the neutral range. Further cuts would risk overheating inflation without addressing the structural issues the economy faces.

Higher government spending could help fill the gap, at least in theory. Whether it actually translates to productivity improvements and diversified trade relationships remains to be seen.

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What About Kelowna?

The Okanagan housing market has been cooling from its pandemic peaks, but it hasn't crashed. Prices have stabilized in most segments. Sales volumes are down from the frenzy years but above pre-pandemic norms.

Today's announcement cements the interest rate environment we're in. Buyers waiting for significantly lower mortgage rates aren't getting them. Sellers hoping rate cuts would bring a rush of buyers won't see that either.

The market is what it is. Rates that were 5% in early 2024 are now 2.25%. That's already worked its way through the system. Home prices haven't collapsed. They adjusted and found a new level.

What matters now is employment, wages, and local economic conditions. Kelowna's economy is tied to tourism, construction, agriculture, and services. Those sectors aren't being hit directly by steel or auto tariffs, but they're affected by broader confidence and business investment trends.

If the structural adjustment Macklem keeps talking about means permanently lower growth and higher costs, that filters through to local markets. Fewer people moving. Less construction. Slower wage growth. All of that affects housing demand.

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The Neutral Range

The Bank defines neutral as a rate that neither stimulates nor constrains economic activity. The neutral range is estimated at 2.25% to 3.25%.

At 2.25%, the Bank is at the very bottom of that range. That means current policy is mildly stimulative. It's providing support, not holding growth back.

If the economy were truly strong, rates would be higher in the neutral range or above it. The fact that the Bank is comfortable at the floor tells you growth is expected to remain modest.

BMO chief economist Douglas Porter told clients the Bank's messaging today aligns with his view of no rate changes through all of 2026.

Other economists see it differently. Some still forecast cuts if the economy weakens. Others think hikes are coming if inflation picks up.

Macklem's position is clear. The Bank is data-dependent. If there's a material change to the outlook, policy will adjust. But the current rate is appropriate for the current situation.

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What Comes Next

The next rate decision is January 28, 2026. That announcement will include a full Monetary Policy Report with updated forecasts.

The January report will be important because it's the first chance the Bank has to formally incorporate the GDP revisions, recent employment data, and the federal budget measures into its projections.

Right now, the Bank sees GDP growth averaging around 1.4% over 2026 and 2027. Inflation is expected to stay close to 2%. The trade conflict with the U.S. is projected to reduce GDP by roughly $40 billion by the end of 2026 compared to earlier forecasts.

Those are the baseline assumptions. What actually happens depends on U.S. trade policy, business confidence, and whether government spending translates to real economic activity.

For anyone making real estate decisions in Kelowna or anywhere else in Canada, the takeaway is simple. The interest rate environment is set. Rates aren't dropping significantly from here, and they might eventually rise if inflation becomes a problem again.

Housing markets adjust to new rate environments. The adjustment from 5% to 2.25% has largely happened. What comes next depends on employment, wages, migration, and local economic conditions, not on further rate cuts that aren't coming. If you're considering buying or selling in the current market, understanding these broader economic forces helps you make decisions based on reality rather than hopes for conditions that won't materialize, and working with the team at Coldwell Banker Horizon Realty means getting guidance grounded in what's actually happening in the market, not what might happen if circumstances were different.