The Bank of Canada has decided to keep its main interest rate at 2.75%, as concerns about global trade and economic uncertainty continue to grow.
A big reason for the cautious approach? Ongoing trade tensions, especially coming from the U.S., have made the economic outlook unpredictable. Depending on how things play out, Canada could either stay on a steady path—or face a recession if trade conflicts drag on.
BOC is Considering Two Possible Scenarios Ahead
Scenario 1: If tariffs stay limited, Canada’s economy may slow temporarily, but inflation will stay close to the 2% target.
Scenario 2: If tensions escalate, we could see a recession in Canada with inflation possibly rising above 3% next year.
There’s no clear path forward yet, and a lot depends on decisions made outside of Canada.
What’s Happening Globally?
In the U.S., growth is slowing, and inflation worries are rising.
In Europe, growth remains weak.
China was doing well but is starting to cool down.
Markets everywhere are shaky due to constant tariff changes and uncertainty.
Oil prices have dropped, signaling weaker global growth.
What’s Canada’s Situation?
The economy is showing signs of slowing down:
People and businesses are spending less.
Hiring is slowing, and March saw a drop in employment.
Inflation was 2.3% in March, but expected to dip a bit due to lower oil prices and the removal of the carbon tax. Still, higher prices may come back due to tariffs and supply issues.
Looking Forward
The Bank of Canada says it’s staying cautious. They want to support economic growth while keeping inflation under control. They’ll keep an eye on how rising costs, weaker demand, and changing expectations affect things over time.
Check out the Bank of Canada's recent policy rate release here.
The Bank’s next interest rate announcement is set for June 4, 2025, and we’ll get another full economic update in July.