The decision: no change
The Bank of Canada held its overnight rate at 2.75% today, with the Bank Rate at 3% and the deposit rate at 2.70%.
They're standing still while they wait for clearer signals — about US trade policy, how much tariffs will actually push up prices, and whether the economy will soften more or hold steady.
Tariffs and global noise
Since the April report, the US administration has kept raising and lowering tariffs. China and the US pulled back from the highest levels and started bilateral talks with other countries, but the outcomes are still anyone's guess. Tariff rates are well above where they were at the start of 2025, and new threats keep appearing.
The global economy has held up in recent months, partly because companies rushed to move goods before tariffs kicked in. In the US, demand stayed relatively strong, but higher imports dragged down first-quarter GDP. Inflation ticked down but remains above 2%, and the price effects of tariffs haven't fully shown up yet. Europe saw growth from exports and plans to spend more on defence. China's economy has slowed as past stimulus fades, and high tariffs are now cutting into Chinese exports to the US.
Financial markets calmed down after the turmoil in April — risk assets recovered and volatility eased — but they're still jittery around US policy announcements. Oil prices have bounced around but are close to where they were in April.
Canada's economy: a mixed picture
Canada's economy grew 2.2% in the first quarter, a bit stronger than the Bank expected. But the details matter: exports to the US got pulled forward, inventories piled up, and final domestic demand was roughly flat.
Business investment in machinery and equipment held up better than forecast. Consumer spending slowed from its very strong fourth-quarter pace but kept growing, even as confidence dropped hard. Housing activity fell, driven by a sharp drop in resales. Government spending also declined.
The labour market has weakened, especially in trade-heavy sectors, and unemployment rose to 6.9%. The Bank expects the second quarter to be considerably weaker — the strength in exports and inventories will reverse, and final domestic demand will stay subdued.
Inflation: lower headline, firmer underneath
CPI inflation eased to 1.7% in April, as the elimination of the federal consumer carbon tax pulled inflation down by 0.6 percentage points. Excluding taxes, inflation rose 2.3% in April — slightly stronger than the Bank expected.
The Bank's preferred core measures, along with other underlying inflation indicators, moved up. Surveys show households expect tariffs to raise prices, and many businesses say they plan to pass on the higher costs. The Bank will be watching all these signals closely to see how inflationary pressures evolve.
Why they held
Uncertainty about US tariffs is still high. The Canadian economy is softer but not sharply weaker. Inflation data showed some unexpected firmness. So Governing Council decided to hold the rate while they gather more information on US trade policy and its impacts.
They're balancing downward pressure on inflation from a weaker economy against upward pressure from higher costs. They're proceeding carefully, watching the risks: how much tariffs reduce demand for Canadian exports, how much that spills into business investment and jobs and household spending, how fast cost increases get passed to consumers, and how inflation expectations shift.
Their focus: making sure you continue to have confidence in price stability through global upheaval. They'll support economic growth while keeping inflation well controlled.
What's next
The next rate announcement is July 30, 2025, when the Bank will also publish its next Monetary Policy Report.
If you're thinking about your mortgage — renewing, buying, refinancing — now's a good time to talk strategy. Rates may move or stay put, but your options and timing are yours to control.
Source: Bank of Canada Website
