On April 16, the Bank of Canada announced it is holding its key interest rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%.
While at first glance this may appear to be a simple pause, the current economic context makes this decision particularly significant.
The Bank itself acknowledged that “pervasive uncertainty makes it unusually challenging to project GDP growth and inflation in Canada and globally.”
Why hold the rate?
The global economic environment has – and continues to – shift drastically.
The Bank noted that “the major shift in direction of U.S. trade policy and the unpredictability of tariffs have increased uncertainty, diminished prospects for economic growth, and raised inflation expectations.”
In response, the April Monetary Policy Report presents not one but two scenarios:
- High uncertainty with limited tariffs: Canadian growth weakens temporarily while inflation stays around 2%.
- Prolonged trade war: Canada’s economy falls into recession in 2025, and inflation temporarily rises above 3% in 2026.
The Bank cautions that “many other trade policy scenarios are possible” and that there is “an unusual degree of uncertainty about the economic outcomes within any scenario.”
Impact on homeowners and buyers
This decision has practical implications for anyone with a mortgage or considering buying a home:
- Variable-rate mortgages: Monthly payments will remain unchanged for now, as the rate stays stable.
- Potential buyers: The pause offers a window to plan a purchase without the pressure of an imminent rate hike.
- Mortgage renewals: This is a good opportunity to review options and compare rates without urgency.
Global context
The decision is also shaped by international factors. According to the Bank:
- In the U.S., “the economy is showing signs of slowing amid rising policy uncertainty and rapidly deteriorating sentiment.”
- In Europe, growth has been modest, with “continued weakness in the manufacturing sector.”
- In China, the economy ended 2024 strong, but “more recent data shows it slowing modestly.”
- Additionally, “financial markets have been roiled by serial tariff announcements, postponements and continued threats of escalation,” increasing volatility.
In Canada, consumption, residential investment, and business spending all show signs of cooling.
The Bank reported that “employment declined in March and businesses are reporting plans to slow their hiring,” while “wage growth continues to show signs of moderation.”
Inflation and what’s next
In March, inflation came in at 2.3% — lower than February, but still above the 1.8% recorded in January.
This recent increase reflects a rebound in goods price inflation and the end of the temporary suspension of the GST/HST.
Starting in April, the removal of the consumer carbon tax is expected to bring inflation down for one year.
However, the Bank warns that “tariffs and supply chain disruptions could push up some prices.”
The extent of this impact will depend on “the evolution of tariffs and how quickly businesses pass on higher costs to consumers.”
Looking ahead, the Bank emphasized: “Our focus will be on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.”
It also stated:
“The Governing Council will proceed carefully, with particular attention to the risks and uncertainties facing the Canadian economy,” including the impact of tariffs on exports, investment, employment, and household spending.
What can you do now?
This rate pause is not a long-term guarantee of stability, but it does represent a chance to make informed decisions with more clarity.
The Bank made its stance clear: “Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians.”
The next interest rate decision is scheduled for June 4, 2025.
We’ll be keeping a close eye on developments and will continue to share insights that help you navigate what comes next — one step at a time, together.
