Bank of Canada Holds Key Interest Rate Steady Amid Economic Uncertainty
So here’s what’s going on with Canada’s interest rates—it’s a story that touches everything from jobs to trade and even your mortgage. The Bank of Canada has decided, once again, to keep its key interest rate unchanged at 2.75% . This marks the fourth consecutive time they've chosen to hold steady rather than hike or cut rates, and it’s all about navigating some tricky economic waters right now.
This decision didn’t come as a big surprise. Most economists and financial markets had already expected this move. Why? Well, the employment landscape in Canada has held up fairly well, even with the drag of U.S. trade tensions and tariffs looming large over cross-border commerce. In fact, 83,000 jobs were added just in June. That’s pretty solid growth, and it’s one of the reasons why the Bank isn’t rushing to cut rates—because a strong job market tends to fuel inflation.
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Speaking of inflation, it has mostly been tamed and hovering near the Bank’s target of 2% . However, core inflation—that is, inflation without the more volatile items like gas or food—is still stubbornly around 3% , and that makes the Bank cautious. They don’t want to cut rates too early and risk prices spiraling again.
Now, on the global front, things aren’t much calmer. The U.S. has been unpredictable with its trade policies, slapping tariffs on various imports. That’s causing ripple effects in Canada. Exporters here had rushed shipments earlier this year to beat potential tariffs, and now we’re seeing the hangover from that. As a result, Canada’s GDP is expected to contract by about 1.5% in the second quarter of 2025. That slowdown is being driven not only by reduced exports but also weaker American demand for Canadian goods.
Still, the Bank points out that the broader economy is showing some resilience. Sure, businesses and households are pulling back a bit because of the uncertainty, and jobs in trade-exposed sectors have taken a hit—but elsewhere, employment remains relatively stable.
Now, could there be a rate cut in the near future? Possibly. The Bank’s Governor, Tiff Macklem , hasn’t ruled it out. If economic growth continues to falter and inflation pressures ease, a rate cut might be necessary. But for now, they’re playing it safe, waiting to see how things unfold.
The next update on interest rates is scheduled for September 17 , and you can bet economists will be watching every economic signal until then. So if you’re wondering about your mortgage or planning a big investment—this pause in rates gives a bit of breathing room, but the story is far from over.
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