The Bank of Canada's Governing Council convened in late May 2025 to deliberate on the country's monetary policy, ultimately deciding to maintain the policy interest rate at 2.75%. The decision followed extensive discussions about both domestic and international economic conditions, as well as potential risks from ongoing trade uncertainties.

Governor Tiff Macklem led the meetings, which were attended by Senior Deputy Governor Carolyn Rogers and Deputy Governors Toni Gravelle, Sharon Kozicki, Nicolas Vincent, Rhys Mendes, and Michelle Alexopoulos. The council examined developments in the global economy since their April Monetary Policy Report. They noted that while the risk of a prolonged global trade war had decreased due to ongoing negotiations by the US administration with various countries, US tariffs had increased substantially and continued to contribute to high levels of uncertainty.

In assessing Canada's economic situation, council members observed slightly stronger-than-expected growth in the first quarter of 2025. This was largely driven by exports and inventory accumulation as businesses anticipated tariff impacts. However, housing activity declined significantly amid reduced consumer confidence and lower immigration rates.

"Members agreed that elevated uncertainty may have been weighing on home sales," noted the council's summary report. Concerns were also raised regarding a softer labor market with employment growth slowing down in April.

On inflation, members discussed recent data showing a decline in consumer price index (CPI) inflation to 1.7% in April following the removal of a consumer carbon tax. "Excluding taxes, inflation was 2.3%, which was slightly above expectations," they reported.

Despite some resilience shown by Canada’s economy amidst trade uncertainty, council members acknowledged that weaker growth could be forthcoming due to ongoing tariff issues and global trade tensions initiated by US policies. They expressed concern over potential upward pressures on inflation from cost increases related to these disruptions.

Ultimately, the Governing Council decided against adjusting interest rates immediately but emphasized their commitment to monitoring evolving economic indicators closely. "Governing Council decided to maintain the policy interest rate at 2.75%, as they continued to gain more information about US trade policy and its impacts on the Canadian economy."

Council members concluded that future decisions would depend heavily on developments in US trade policy and its impact on Canadian business investments, employment rates, household spending habits as well as inflationary pressures arising from such uncertainties.