Bank of Canada holds key lending rate at 2.75% as “Uncertainty remains high”

Today, the Bank of Canada announced that it would hold the target for the overnight lending rate at its current level of 2.75%. This is the second consecutive month that the Bank has chosen not to change interest rates. 

Though inflation levels have gradually eased and the country recorded stronger-than-expected GDP growth in the first quarter of 2025, trade disruptions with the United States continue to cast doubt over Canada’s future economic performance. The labour market has softened, especially in trade-sensitive sectors, pushing unemployment up to 6.9%. Economic conditions are expected to deteriorate further by the end of the second quarter, said the Bank in its announcement.

“Uncertainty remains high. The Canadian economy is softer but not sharply weaker. And we’ve seen some firmness in recent inflation data. Against this backdrop, we decided to hold the policy rate unchanged as we continue to gain more information on US trade policy and its impacts,” said Tiff Macklem, Governor of the Bank of Canada, in a press conference with reporters following the announcement. “The trade conflict initiated by the United States remains the biggest headwind facing the Canadian economy.”

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