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Today, the Bank of Canada announced that it will hold its key interest rate at 2.75%, following a series of rate cuts that began in mid-2024. After lowering the policy rate by a total of 2.25 percentage points over the last ten months, the central bank is now pressing pause.

This decision comes at a pivotal moment for the Canadian economy, as global uncertainties—especially renewed trade tensions with the U.S.—begin to clash with signs of weakness at home. Below, we break down what this announcement means, why the Bank chose to hold, and how Canadian homeowners should prepare for what’s next.

Why the Bank of Canada Paused After Cutting Rates

Between June 2024 and March 2025, the Bank of Canada steadily lowered interest rates to stimulate borrowing and spending amid slowing economic growth. With inflation gradually easing and the economy losing momentum, the cuts were seen as a necessary response.

But now, the outlook has become more complex:

The Bank’s Hold Reflects:

Cautious optimism that inflation is heading toward target.

Heightened uncertainty due to U.S. tariff threats and global instability.

A wait-and-see approach to determine how recent rate cuts are affecting growth and consumer behaviour.

This is not a signal that the Bank is done adjusting rates—it’s a strategic pause while it reassesses new risks.

Global Headwinds: U.S. Tariffs and Trade Disruption

One of the biggest wild cards right now is the return of U.S. protectionism. New tariffs on Canadian-made goods—particularly autos, aluminum, and steel—have already started to strain cross-border trade.

What This Means:

Export-heavy industries in Ontario, Quebec, and Western Canada face cost increases and reduced demand.

Supply chain disruptions could spill into other sectors like construction, retail, and transportation.

Tariffs may trigger cost-push inflation, where rising input costs flow into higher consumer prices.

The Bank of Canada acknowledged that if these tariffs escalate into a full-blown trade war, it could tip Canada into a mild technical recession, even as prices rise—a difficult scenario known as stagflation.

Domestic Economy: Signs of Slowing

At home, Canada’s economy is showing signs of fatigue. Although job numbers and retail spending were stable through late 2024, recent data paints a different picture:

Key Indicators:

Employment fell in March 2025, with job losses concentrated in construction, retail, and real estate sectors.

Household consumption is slowing, especially for big-ticket items like vehicles and appliances.

Business investment and housing starts have declined since the start of the year.

Delinquency rates on consumer debt have begun to inch up—particularly among younger households with high credit utilization.

Together, these indicators suggest that previous rate cuts may take time to stimulate real economic momentum.

Inflation Breakdown: Still a Balancing Act

Inflation came in at 2.3% in March, which is down from 3.5% last summer. That’s good news—but the path forward remains unclear.

Upward pressures:

U.S. tariffs increasing the cost of goods like cars and machinery.

Higher food prices driven by supply chain disruptions.

The end of GST/HST rebates in some provinces.

Downward pressures:

Removal of the federal carbon tax effective February 2025.

Global oil prices have softened, reducing fuel and shipping costs.

Wage growth has slowed as job markets cool.

The Bank expects inflation to fluctuate in the short term—but to settle near the 2% target by the end of the year if no major shocks occur.

The Road Ahead: What Will the Bank Do Next?

The Bank of Canada laid out two potential economic scenarios that will shape the direction of future rate moves:

Scenario A: Controlled Trade Impact

Tariffs remain limited.

Domestic spending rebounds.

Inflation stays stable.

Result: The Bank holds steady or gradually raises rates to manage inflation risk.

Scenario B: Prolonged Trade War + Recession

Tariffs escalate and spread to more sectors.

Businesses cut back investment and hiring.

Inflation spikes temporarily, but demand crashes.

Result: The Bank resumes rate cuts to prevent a deeper recession.

We’re at a fork in the road. The Bank of Canada is prepared to act either way, depending on which signals become stronger.

Impact of Trump Tariffs on Interest Rates in Canada

The recent implementation of U.S. tariffs on Canadian goods has had a notable impact on Canada's economic outlook. These tariffs have disrupted trade flows, increased costs for businesses, and contributed to inflationary pressures.

In response, the BoC has been cautious in its approach to interest rate adjustments. While some economists advocate for further rate cuts to stimulate the economy, others warn that such moves could exacerbate inflation.

Bank of Canada Rate Announcement Schedule 2025

The BoC has scheduled eight interest rate announcements for 2025. These are:​

January 29​, 2025

March 12​, 2025

April 16, 2025

June 4​, 2025

July 30​, 2025

September 17​, 2025

October 29​, 2025

December 10​, 2025

These announcements are typically made at 9:45 a.m. Eastern Time and are closely watched by financial markets, businesses, and consumers.​

Will the Bank of Canada Continue to Lower Rates?

If you’re a homeowner with a mortgage, HELOC, or other debt, this is a critical time to evaluate your options.

What to Consider:

If rates rise later this year, locking in a lower rate today could protect you from higher monthly payments.

If rates fall again, refinancing or consolidating high-interest debt could still save you thousands over time.

There are many viable and affordable mortgage options for homeowners with equity, even if they’re dealing with credit issues or bank rejections.

For those with variable-rate products, today’s decision offers short-term stability—but don’t assume it will last.