- No Rate Cut: The Bank of Canada maintained its target for the overnight rate at 2.75%. This decision reflects ongoing high uncertainty in global trade despite some Canadian economic resilience.
- Economic Outlook: The global economy has shown reasonable resilience amid trade volatility, with modest growth in the US and Euro area, and China’s exports rebalancing. In Canada, after a strong Q1, GDP likely contracted by 1.5% in Q2 due to export reversals and reduced US demand, with business and household spending restrained by uncertainty. The Bank’s July Monetary Policy Report presents tariff scenarios rather than a conventional base case.
- Inflation: Canadian CPI inflation rose slightly to 1.9% in June, and excluding taxes, it reached 2.5%, largely due to increased non-energy goods prices. While shelter price inflation eases, underlying inflation is assessed to be around 2.5%, with potential upward pressures from tariff-related costs on businesses.
- Monetary Policy Stance: The Bank of Canada’s Governing Council held the policy rate steady due to persistent high uncertainty, Canadian economic resilience, and ongoing inflationary pressures. They’ll continue assessing how a weaker economy’s downward inflation pressure balances with upward pressure from trade disruptions and higher costs. A rate cut could be considered if the economy weakens further and trade-related price increases are contained.
- The next scheduled announcement for the overnight rate target is September 17, 2025.
Bank of Canada Holds Policy Rate At 2.75%
