The decision: rates stay put
On April 16, 2025, the Bank of Canada kept its overnight rate at 2.75%. That means the Bank Rate sits at 3% and the deposit rate at 2.70%.
No surprise there. The bigger story is what's happening around us — and what the Bank is watching next.
Why they held: trade war fog
US trade policy shifted hard and fast. Tariffs are unpredictable, uncertainty is sky-high, and that makes forecasting nearly impossible. The Bank didn't even publish a single forecast this time — instead, they laid out two scenarios in the April Monetary Policy Report.
Scenario one: tariffs stay limited, uncertainty stays high but manageable. Growth slows for a bit, inflation hovers around 2%.
Scenario two: full-blown trade war. Canada falls into recession this year, inflation spikes above 3% in 2026.
Both are possible. Many others are too. The Bank's honest about it: the speed and scale of what's unfolding in the US is unprecedented, and the range of outcomes is wide.
What's happening globally
Global growth was solid late last year, inflation easing toward central bank targets. But tariffs and uncertainty have dimmed the outlook.
In the US, the economy is showing signs of slowing. Policy uncertainty and crashing sentiment are weighing on activity, and inflation expectations have ticked up.
Europe's growth remains modest, manufacturing still weak. China was strong at the end of 2024 but recent data shows it cooling.
Financial markets have been a rollercoaster — every tariff announcement, postponement, or threat sends another wave through. Oil prices have dropped since January, mostly on weaker global growth expectations. The Canadian dollar strengthened recently, but mainly because the US dollar weakened across the board.
What's happening here in Canada
The Canadian economy is slowing. Tariff noise and uncertainty are dragging down consumer and business confidence. Spending, home building, and business investment all look weaker in the first quarter.
The labour market recovery has stalled. Employment fell in March. Businesses are pulling back on hiring plans. Wage growth is still moderating.
Inflation came in at 2.3% in March — down from February but still higher than the 1.8% the Bank saw back in January. Part of that bump reflects goods prices rebounding and the end of the temporary GST/HST break.
Starting in April, inflation will get pulled down for a year by the removal of the consumer carbon tax. Lower oil prices will help too. But tariffs and supply chain disruptions are expected to push some prices up. How much depends on how tariffs evolve and how fast businesses pass those costs on to you.
Short-term inflation expectations have climbed — businesses and consumers are bracing for higher costs. Longer-term expectations haven't moved much.
What the Bank is watching now
The Bank is balancing two pressures: downward (from a weaker economy) and upward (from higher costs). Their job is to keep Canadians confident that prices will stay stable, even through global chaos.
They're proceeding carefully, eyes on four big questions: How much do tariffs dent demand for Canadian exports? How much does that spill into business investment, jobs, and household spending? How much and how fast do cost increases get passed to consumer prices? And where do inflation expectations go from here?
The Bank is clear: monetary policy can't fix trade uncertainty or stop a trade war. What it can and must do is maintain price stability.
What this means for your mortgage
If you're renewing soon or thinking about a new mortgage, the range of outcomes just got wider. In the softer scenario, rates could ease further as growth cools. In the harder scenario, inflation could force the Bank to hold or even tighten again.
No one knows which path we're on yet. What you can do is stress-test your own plan: make sure your mortgage fits your cash flow even if rates move against you. If you're locked into a rate that feels too high and you're renewing this year, talk to us about your options before your renewal date.
The next rate announcement is June 4, 2025. The next full Monetary Policy Report lands July 30, 2025.
Source: Bank of Canada Website
