The Bank of Canada announced today that it will hold its key interest rate at 2.75 per cent, citing ongoing uncertainty around U.S. trade policy and its potential impact on the Canadian economy. This marks the third consecutive time the central bank has maintained the current rate since March 2025.
In its statement, the Bank expressed concern over the lack of clarity regarding future tariffs and the fate of Canada-U.S. trade negotiations. With U.S. President Donald Trump’s looming deadline of August 1 for a new trade deal and the threat of 35 per cent tariffs on non-CUSMA-compliant goods, the Bank warned that the outlook for Canada’s economy remains uncertain and clouded. Despite these risks, inflation continues to hover near the Bank’s 2 per cent target, providing room to hold the rate steady for now.
The central bank also noted that while some global trade tensions have eased, Canada continues to face heightened vulnerability. The possibility of prolonged or additional U.S. tariffs remains high, and this unpredictability has hindered the Bank’s ability to provide base-case projections for GDP growth or inflation. Instead, the Bank’s latest Monetary Policy Report presents three possible trade scenarios: a status quo outlook, a de-escalation scenario where tariffs are reduced, and an escalation scenario in which trade tensions intensify significantly. In the worst-case scenario, the Bank anticipates a contraction in the Canadian economy through the remainder of 2025.
Despite these concerns, the Bank acknowledged that the Canadian economy has shown signs of resilience. Consumer price index (CPI) inflation stood at 1.9 per cent in June, with tax-excluded inflation rising to 2.5 per cent. However, business and household spending remain restrained, and employment is weakening in trade-affected sectors even as it holds steady in other areas.
The Bank of Canada did not rule out future interest rate adjustments, stating that if economic weakness intensifies and inflationary pressures from trade disruptions are contained, a rate cut could be considered to support economic stability.
Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers will provide further details at a press conference scheduled for 10:30 a.m. Eastern Time today. Meanwhile, economists are also closely monitoring the U.S. Federal Reserve’s rate decision, expected later today, for additional signals on the trajectory of North American monetary policy.
The Bank of Canada’s next scheduled rate announcement is set for September 17, 2025.