‘The future is no clearer’: Bank of Canada holds key interest rate steady

By The Canadian Press

Updated: April 16, 2025 at 12:27PM EDT

OTTAWA — The Bank of Canada left its benchmark interest rate unchanged Wednesday as it waits to get a clearer picture of how global trade uncertainty is going to impact the Canadian economy.

The central bank held its policy rate steady at 2.75 per cent, the first time it has left the key rate unchanged following seven consecutive cuts since June.

That decision arrived in the midst of the United States’ ever-shifting global trade war, and Bank of Canada governor Tiff Macklem made clear that the disruption from south of the border was the clear focus of Wednesday’s decision.

“The dramatic protectionist shift in U.S. trade policy and the chaotic delivery have increased uncertainty, roiled financial markets, diminished global growth prospects and raised inflation expectations,” he said at a press conference.

“The future is no clearer. 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.”

The Bank of Canada raises the policy rate when central bankers fear inflation could accelerate and lower it when policymakers want to stimulate growth in the economy.

But both scenarios are in play right now amid what Macklem called “considerable uncertainty” tied to the United States’ global tariff campaign.

“We decided to hold our policy rate unchanged as we gain more inflation about both the path forward for U.S. tariffs and their impacts,” Macklem said.

The central bank issued a pair of economic forecasts alongside the rate decision.

One sees the tariffs and threats negotiated away quickly and the economy stall, but escape with limited damage. Inflation would ease to 1.5 per cent for most of the year – mostly thanks to the elimination of the consumer carbon tax – before rising back to the central bank’s two per cent target.

The other forecast envisions a more protracted global trade war that sends Canada into a year-long recession.

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