After 7 consecutive rate cuts, and with Canada combating tariffs and a trade war with the United States, the Bank of Canada announced a rate hold today. Today's decision from Canada's central bank keeps their policy rate to 2.75%.
In his prepared opening statement Tiff Macklem, the Governor of the Bank of Canada discussed the bank's decision to hold rates. "The Canadian economy ended 2024 in good shape. Inflation had been close to the 2% target since last summer. The substantial interest rate reductions since last spring had boosted household spending, economic growth had picked up and many businesses told us the economy had renewed momentum. Since then, the dramatic protectionist shift in US trade policy and the chaotic delivery have increased uncertainty, roiled financial markets, diminished global growth prospects and raised inflation expectations. The path for US trade policy remains highly unpredictable. There is also considerable uncertainty about the impacts of a trade war on our economy." (Bank of Canada, 2025)
Macklem explained the effects of the trade war and tariffs saying, "A lot has happened since our March decision five weeks ago. But the future is no clearer. We still do not know what tariffs will be imposed, whether they’ll be reduced or escalated, or how long all of this will last. At this meeting, we decided to hold our policy rate unchanged as we gain more information about both the path forward for US tariffs and their impacts. Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What we can and must do is ensure that Canadians continue to have confidence in price stability." (Bank of Canada, 2025)
The Bank of Canada's next rate announcement is scheduled for June 4, 2025.
Graph Courtesy: Bank of Canada; https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/
Quotes Courtesy: Bank of Canada; https://www.bankofcanada.ca/2025/04/opening-statement-2025-04-16/
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