After seven consecutive reductions, the Bank of Canada left its key overnight lending rate unchanged at 2.75% on Wednesday.
Market odds had been about evenly split between another 25-point basis cut and the Bank standing pat heading into today’s announcement, which follows a Statistics Canada report yesterday which showed headline inflation in March at 2.3%, down from 2.6% in February.
In its announcement, the Bank cited the global economic uncertainty being caused by the trade policies of US President Donald Trump, which may blunt economic growth while also pushing consumer prices higher.
The Canadian economy is slowing as tariff announcements and uncertainty pull down consumer and business confidence, the Bank said, adding that consumption, residential investment, and business spending all look to have weakened in the first quarter. Amid the trade tensions, employment declined in March and businesses are reporting plans to slow their hiring.
On the other hand, short-term inflation expectations have moved up, as businesses and consumers anticipate higher costs from trade conflict and supply disruptions, the Bank said.
“(The Bank) will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs,” it said. “Our focus will be on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. This means we will support economic growth while ensuring that inflation remains well controlled.”
Monetary policy, the Bank said, “cannot resolve trade uncertainty or offset the impacts of a trade war.” What it can and must do is maintain price stability for Canadians, it added.
The Bank lowered its key interest rate by 25 basis points last month, marking its seventh consecutive rate cut since mid-2024.
