The Bank of Canada announced on June 4, 2025, that it would maintain its policy interest rate at 2.75%, marking the second consecutive hold following earlier rate cuts totaling 225 basis points since June 2024 (storeys.com). Governor Tiff Macklem noted that ongoing U.S. trade policy uncertainty and persistent core inflation made a cautious approach necessary.
Trade Worries Keep the Rate on Lock
Canada‘s central bank emphasized that continuing U.S. tariffs, especially the doubled duties on steel and aluminum, remain the “biggest headwind” to economic growth (storeys.com). Macklem stressed the need to closely monitor evolving trade conditions before deciding on further rate cuts.
Sticky Inflation and Economic Outlook
Although headline inflation eased to 1.7% in April—due largely to the elimination of the federal consumer carbon tax—core inflation remained elevated at around 2.3–3.15%, with the Bank’s preferred gauge hitting its highest in nearly a year (storeys.com). Strong Q1 GDP growth (2.2%), driven by export and inventory gains, has yet to translate into sustained domestic momentum, while rising unemployment and slowing growth keep pressure on the Bank (wsj.com).
What the Big Banks Think
Canada’s major banks now broadly expect more holds before any cuts:
- BMO forecasts additional holds, with a first cut in late July to 2.25% (canadianmortgagetrends.com).
- TD Economics anticipates two more cuts this year, aiming for a rate near 2.25% (stories.td.com).
- CIBC sees strong justification for cuts but believes the Bank will wait for clarity (storeys.com).
What It Means for Canadians
For borrowers, holding rates steady means mortgage payments stay stable, offering time to plan amid financial uncertainty. Meanwhile, savers continue to benefit from higher yields. As the BoC continues to assess inflation trends and trade impacts, future rate moves are expected to be gradual and cautious.
Sources:
- Bank holds rate at 2.75%, cites trade risks and inflation (reuters.com, reuters.com, bankofcanada.ca)
- Reuters: BoC holds rate, says future cut possible (reuters.com)
- WSJ: sticky core inflation keeps BoC on sidelines (wsj.com)
- BMO, TD, CIBC forecasts discussed
