Bank of Canada holds rates steady at 2.75% awaiting more clarity on US tariffs

The Bank of Canada paused the cycle of rate cuts, awaiting how US President Donald Trump’s tariff policy unrolls. The regulator held its borrowing costs unchanged at the so-called neutral level of 2.75%. The central bank’s policymakers claim they will maintain a cautious approach to adjusting rates. 

Bank of Canada officials believe monetary policy cannot fix the uncertainty or offset the damage done by trade confrontation. Thus, the regulator will focus on supporting economic growth and controlling inflation.

Policymakers did not provide a detailed forecast on GDP and price dynamics, citing uncertainty. However, the Bank of Canada offered two scenarios of the country’s economic outlook. 

If a deal on tariffs is reached between the US and Canada, GDP will be flat in the second quarter and then rise slightly. At the same time, inflation will fall below 2% this year.

In case of long-lasting trade tensions, the economy will contract in the second quarter and plunge into a recession. In 2026, GDP growth will slow down, while inflation will be above 3% due to US tariffs and supply chain disruptions.