Bank of Canada Holds Interest Rate at 2.75%, Signals Caution Amid Trade Uncertainty

Ottawa, June 4, 2025 — The Bank of Canada (BoC) has kept its key interest rate steady at 2.75% for the second consecutive time, reflecting a measured approach as uncertainties surrounding global trade and domestic inflation continue to loom.

Governor Tiff Macklem said the central bank reached a “clear consensus” to pause any rate changes during the current cycle. “At this decision, there was a clear consensus to hold policy unchanged as we gain more information,” Macklem stated, pointing to both progress and persistent risks influencing the Canadian economy.

While Canada’s GDP growth exceeded expectations in the first quarter, registering a 2.2% annualized gain, the BoC remains concerned about the ripple effects of U.S. trade tensions and the recent volatility in inflation metrics.

Although headline inflation eased to 1.7% in April, core inflation which excludes food and energy climbed to 3.15%, its highest level in nearly a year, indicating continued underlying price pressures that could derail the BoC’s path to price stability.

In light of these mixed signals, the BoC is keeping the door open for future rate cuts, especially if trade disputes escalate or domestic conditions worsen. Market analysts speculate that the benchmark rate could be trimmed to around 2% by year-end if economic momentum fades.

All eyes now turn to the BoC’s next policy meeting on July 30, when it will also release its updated Monetary Policy Report with fresh projections on growth, inflation, and rate trajectory.