The Bank of Canada has kept its key rate at 2.75 per cent, choosing not to add more support to the economy, as uncertainty around U.S. President Donald Trump’s tariffs clouds the Canadian economic forecast.
The bank had been cutting the policy rate from a five per cent peak since June, reducing it by 225 basis points — more than any other G7 central bank.
“A lot has happened since our March decision five weeks ago. But the future is no clearer,” said Bank of Canada governor Tiff Macklem in a statement. “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 U.S. tariffs and their impacts,” Macklem said, adding that the Bank of Canada cannot undo the devastating impacts of a trade war and it is important for the bank to keep inflation under control.
Prior to the decision, economists’ predictions were split between a pause or another 0.25 percentage-point cut.
Desjardins economists Royce Mendes and Tiago Figueiredo said Wednesday’s call by the bank would be a “difficult decision.”
“While tariffs and market volatility will slow the economy, policymakers are concerned that the global trade war could unleash another wave of inflation,” they wrote in a note to clients on Tuesday.
“In a financial crisis or pandemic, time is of the essence. However, in a trade war, things are slower moving. Officials have the luxury of not being forced into a decision they may later regret.”
The announcement will be followed by a news conference with Macklem and senior deputy governor Carolyn Rogers at 10:30 a.m.
This is a developing story.
