Bank of Canada Governor Tiff Macklem cited “unusual uncertainty” in the economy when announcing the central bank’s decision to leave its key interest rate unchanged at 2.75%.
The Bank of Canada has now elected to hold its trendsetting overnight interest rate steady for two consecutive policy meetings.
Prior to that, the central bank had lowered interest rates seven consecutive times starting in June 2024, dropping its benchmark policy rate to its current level of 2.75%.
At a news conference in Ottawa, Governor Macklem said the central bank is walking a tightrope as U.S. tariffs and trade tensions continue to weigh on Canada.
“The Canadian economy is softer but not sharply weaker. And we’ve seen some firmness in recent inflation data,” he said in explaining the central bank’s decision to remain on hold.
In prepared remarks, Macklem added that the Bank of Canada is dealing with tough-to-predict inflation, and that U.S. trade policy remains the “biggest headwind” facing the economy.
As he has previously, the central bank governor also noted that Canada's trade war with
the U.S. could lead to an economic recession.
For now, the Bank of Canada needs more data points and time to evaluate the impacts on the economy before adjusting interest rates further, said Macklem.
The Bank of Canada’s decision to stand pat on interest rates came a day after U.S. President Donald Trump doubled import tariffs on steel and aluminum to 50%, including products shipped from Canada.
The latest interest rate decision was widely expected, with 20 of 26 economists surveyed by Reuters saying they expected Canada’s central bank to hold rates at current levels.
