The Bank of Canada announced it will maintain the policy interest rate at 2.75%, marking a stable point after seven previous rate cuts. This decision follows a period of economic growth amid significant uncertainty due to recent shifts in US trade policy. Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers addressed these concerns during a press conference on April 16, 2025.

“The Canadian economy ended 2024 in good shape. Inflation had been close to the 2% target since last summer,” Macklem noted, emphasizing the positive impact of reduced interest rates on household spending and economic growth. However, recent developments in US trade policy have introduced unpredictability, which has affected financial markets and global growth expectations.

The bank previously reduced the policy interest rate by 25 basis points in response to threats of increasing US tariffs. Despite actions taken, the Bank of Canada remains cautious as the future of US trade policy remains unclear. Macklem stated, “At this meeting, we decided to hold our policy rate unchanged as we gain more information about both the path forward for US tariffs and their impacts.”

Concerns over inflation have also been noted, with Macklem explaining, “Inflation in Canada has risen from 1.8% at the time of the January Report to 2.3% in March.” The forecast for Canadian GDP growth in the first quarter of 2025 is about 1.8%, though it is expected to weaken in the second quarter.

Acknowledging the diverse potential outcomes of ongoing trade discussions, Macklem presented two illustrative scenarios in the Monetary Policy Report (MPR). Scenario 1 predicts a moderate recovery with inflation dropping, while Scenario 2 anticipates a prolonged recession due to a global trade war. “To be clear, these are only two of many possible scenarios,” Macklem remarked.

The bank's strategy moving forward focuses on maintaining price stability and supporting economic growth. Macklem stressed, “Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war, but it can ensure that Canadians continue to have confidence in price stability.” The Bank of Canada will continue to monitor incoming data closely, weighing the risks and uncertainties that might influence the national economy and inflationary pressures.

Macklem concluded by emphasizing the continued commitment to adapt monetary policy as required, stating, “As always, we will be guided by our monetary policy framework and our commitment to maintain price stability over time.” The press conference concluded with an invitation for questions from the media.