Bank of Canada Maintains Rates as TSX Reverses Early Momentum

As the Bank of Canada announced its widely anticipated decision to hold rates unchanged, Canada’s equity market retraced earlier gains, turning negative on Wednesday trading. The TSX benchmark faced headwinds from geopolitical uncertainties while investors awaited monetary policy guidance from the Federal Reserve and remarks from Fed Chair Jerome Powell.

The S&P/TSX Composite Index climbed to 33,288.41 before retreating to a low of 32,997.38. By mid-session, the index recovered slightly to 33,055.76 but remained under pressure, closing down 40.74 points, representing a 0.11% decline. Energy and materials stocks provided relative strength through higher commodity valuations, while technology, healthcare, consumer discretionary, financials, and industrial sectors traded notably weaker.

Bank of Canada’s Policy Decision: Rates Held at 2.25%

The Bank of Canada maintained its policy rate at 2.25% for the second consecutive meeting, aligning with market expectations. The overnight rate remained steady at 2.25%, with the bank rate positioned at 2.5% and the deposit rate at 2.2%.

In its accompanying statement, Canada’s central bank noted that its Governing Council determined the current policy rate remains appropriate, contingent on economic evolution aligning with projections. However, the BoC acknowledged heightened uncertainty and signaled readiness to respond should the economic outlook shift. The bank reiterated its commitment to preserving price stability confidence during this period of global volatility.

Growth projections remain modest, with the central bank expecting 1.1% expansion in 2026 and 1.5% in 2027, broadly consistent with October forecasts. A significant risk factor underscored by the BoC centers on the forthcoming review of the Canada-US-Mexico Agreement, which carries considerable uncertainty for Canada’s trade dynamics.

Energy and Materials Rally While Tech Stumbles

Energy stocks demonstrated resilience, with Parex Resources, Tamarack Valley Energy, Strathcona Resources, Topaz Energy, Cenovus Energy, and Arc Resources each advancing 1-2%. The sector benefited from firmer commodity prices amid ongoing global demand.

In the materials space, Aya Gold & Silver jumped 5.7%, leading the sector higher. Ivanhoe Mines, Ngex Minerals, Eldorado Gold, Capstone Mining, Dundee Precious Metals, Agnico Eagle Mines, Wheaton Precious Metals, Ero Copper, Discovery Silver Corp., Vizsla Silver, and Skeena Resources climbed between 1.4% and 2.5%.

Technology stocks faced pronounced weakness. Dye & Durham plummeted over 10%, while CGI Group and Coveo Solutions declined approximately 4.1% and 3.1% respectively. Constellation Software slipped 2.5%, and Descartes Systems Group, Computer Modelling Group, and Kinaxis drifted lower by 1-1.6%.

Consumer and Healthcare Sectors Under Pressure

Healthcare stocks similarly underperformed, with Curaleaf Holdings falling nearly 4% and Bausch Health Companies declining 0.6%. Consumer discretionary names faced headwinds, as Aritzia and Gildan Activewear lost 4% and 2.8% respectively. Magna International, Pet Valu Holdings, and Brp Inc. also experienced sharp declines.

Market Outlook and Central Bank Uncertainty

The market’s mixed performance reflects investor caution ahead of U.S. monetary policy announcements. With the Bank of Canada signaling openness to rate adjustments should economic conditions warrant, participants remain focused on data-dependent developments and potential trade policy shifts under the CUSMA review framework.