Bank of Canada Holds Interest Rate Steady Amid Trade Uncertainty
The Bank of Canada announced today that it will maintain its overnight policy rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%.
This decision comes amid growing global economic uncertainty, largely driven by shifting US trade policies and tariff tensions. These developments have clouded the outlook for growth and inflation both in Canada and worldwide.
In its latest Monetary Policy Report (MPR), the Bank outlined two possible scenarios:
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In one, tariffs remain limited, keeping Canadian inflation near its 2% target despite a temporary economic slowdown.
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In the other, a prolonged trade war could push Canada into recession this year, with inflation rising above 3% in 2026.
While global growth was solid in late 2024, recent trade conflicts have weakened prospects. Financial markets have become volatile, oil prices have fallen, and the Canadian dollar has strengthened alongside a softer US dollar.
At home, the Canadian economy is slowing, with declines in consumer spending, residential investment, and business confidence. Labour market recovery has also stalled, with employment dropping in March and hiring plans cooling.
Inflation stood at 2.3% in March, down from February but higher than January's 1.8%. Lower oil prices and the removal of the consumer carbon tax are expected to ease inflation in the near term, but tariffs and supply disruptions may push some prices higher.
The Bank’s Governing Council emphasized its commitment to maintaining price stability and supporting economic growth through this period of global uncertainty. Monetary policy, it noted, cannot resolve trade disputes, but it will work to keep inflation in check and uphold confidence in Canada’s economic future.
Key risks to watch:
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The impact of higher tariffs on Canadian exports and investment
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Spillover effects on jobs and household spending
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How quickly businesses pass on higher costs to consumers
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Shifts in inflation expectations
The Bank of Canada will continue to monitor these developments closely and adjust its policy approach as needed. Call us at the Rocca Sisters if you want to chat about how these rate changes can effect you as a buyer or seller. 905.335.4102 info@roccasisters.ca