The Bank of Canada (BoC) has decided to maintain its benchmark interest rate at 2.75%, halting a series of seven consecutive cuts. This decision reflects the central bank’s cautious approach in the face of escalating trade tensions and unpredictable U.S. tariff policies.
Governor Tiff Macklem emphasized the challenges posed by the volatile trade environment, stating that the BoC is adopting a “wait-and-see” stance to better assess the evolving economic landscape. The central bank’s April Monetary Policy Report outlines two potential scenarios: one where tariffs are limited, leading to moderate growth and stable inflation, and another involving a prolonged trade conflict resulting in a recession and inflation surpassing 3% by mid-2026.
Recent economic indicators show signs of slowing momentum. Canada’s inflation rate eased to 2.3% in March, down from 2.6% in February, primarily due to lower gasoline and travel prices. Additionally, employment figures have softened, and business investment appears to be waning. Despite these trends, the BoC remains vigilant, monitoring the balance between inflationary pressures from tariffs and the dampening effects of reduced economic activity.
Financial markets have responded to the BoC’s decision with mixed reactions. The Canadian dollar experienced a slight pullback from recent highs, while bond yields remained relatively stable. Analysts anticipate that the central bank may resume rate cuts later in the year if economic conditions deteriorate further.
The BoC’s current policy underscores its commitment to navigating the Canadian economy through a period of heightened global uncertainty, prioritizing price stability and sustainable growth.
