Bank of Canada holds interest rate steady for first time in 2025

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The Bank of Canada (BoC) announced on Wednesday morning that it's holding its policy rate at 2.75 per cent.

Before this, the central bank had made two 0.25 per cent cuts to its key interest rate, with the last one on March 12 bringing the rate to 2.75 per cent.

On Tuesday, Statistics Canada shared March inflation data, showing that inflation slowed to 2.3 per cent following a 2.6 per cent increase in February.

The BoC says it was considering two scenarios caused by new U.S. trade policies.

The first is increased uncertainty, but limited tariffs, where Canadian growth weakens temporarily and inflation remains around the two per cent target. The second scenario is a prolonged trade war, which causes Canada's economy to fall into recession this year, with inflation rising temporarily above three per cent next year.

"Our focus will be on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval," reads the Governing Council's announcement. "This means we will support economic growth while ensuring that inflation remains well-controlled."

Canada's central bank says it will continue to assess the extent to which higher tariffs reduce demand for Canadian exports; how much this affects business investment, employment and household spending; how much and how quickly cost increases are seen in consumer prices; and how inflation expectations evolve.

"Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians," reads the announcement.

Last week, Ratehub.ca mortgage expert Penelope Graham told us that while Canada had largely dodged the worst of the tariff pain, the BoC's policymakers would assess the impact on our trade partners, and the effect at home, to make a decision on April 16.

She said the central bank would be weighing plummeting consumer and business sentiment, based on its own quarterly survey.