- The Bank of Canada held its benchmark interest rate steady at 2.75 per cent on Wednesday
- This marks the second consecutive rate hold following a series of seven cuts
- Higher rates typically cool spending and inflation, while lower rates aim to stimulate growth
- Economists say the central bank is likely to stay on the sidelines until there is more clarity on how trade tensions will evolve and affect inflation and growth
The Bank of Canada held its benchmark interest rate steady at 2.75 per cent on Wednesday, maintaining a cautious stance as policymakers await greater clarity on the economic fallout from escalating global trade tensions.
“Uncertainty remains high,” an official statement from the central bank reads. “While the global economy has shown resilience in recent months, this partly reflects a temporary surge in activity to get ahead of tariffs.”
The decision, widely anticipated by economists and financial markets, marks the second consecutive rate hold following a series of seven cuts. Governor Tiff Macklem cited ongoing uncertainty surrounding international tariffs as a key reason for the central bank’s continued pause.
The announcement comes on the same day that the United States implemented new 50 per cent tariffs on steel and aluminum imports — doubling the previous rate. Canada has responded with its own retaliatory measures, further complicating the trade landscape.
The Bank of Canada uses its policy rate to influence economic activity: higher rates typically cool spending and inflation, while lower rates aim to stimulate growth. However, the current environment presents a complex challenge. Trade disruptions can simultaneously drive up prices and dampen economic momentum, creating a dilemma for central bankers.
In March, the bank lowered the rate to 2.75 per cent, where it has been since, citing the need to assess the full impact of tariff-related uncertainty. That cautious approach continues, with Macklem emphasizing that the Bank will remain data-dependent in the months ahead.
Economists say the central bank is likely to stay on the sidelines until there is more clarity on how trade tensions will evolve and affect inflation and growth.
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