Decision comes ahead of key deadline in US-Canada trade negotiations
The Bank of Canada (BoC) elected to hold interest rates steady at 2.75 per cent today, marking the third consecutive meeting where interest rates were left unchanged.
The decision follows a month of conflicting datapoints around inflation, core inflation, and unemployment that weighed on the BoC's decision. Perhaps most notably, June inflation numbers showed core CPI metrics rising above three per cent. Ongoing uncertainty in US-Canada trade relations continues to weigh on economic behaviour.
"While some elements of US trade policy have started to become more concrete in recent weeks, trade negotiations are fluid, threats of new sectoral tariffs continue, and US trade actions remain unpredictable," the announcement reads.
June employment numbers showed surprising strength, with a halt to declines in goods producing sector jobs.
The announcement also comes with the publication of a new monetary policy report. That report, notably, does not present a conventional base case projection for GDP growth and inflation. Instead it uses a "current tariff scenario" based on what is in plas as of July 27th, as well as alternative scenarios with the escalation or de-escalation of tariffs.
According to the BoC's current tarriff scenario, they project global growth to slow to around 2.5 per cent by the end of the year, before rising to around 3 per cent over 2026 and 2027.
"In Canada, US tariffs are disrupting trade but overall, the economy is showing some resilience so far," the announcement reads. "After robust growth in the first quarter of 2025 due to a pull-forward in exports to get ahead of tariffs, GDP likely declined by about 1.5% in the second quarter. This contraction is mostly due to a sharp reversal in exports following the pull-forward, as well as lower US demand for Canadian goods due to tariffs."
Under the current tariff scenario, the BoC projects that GDP growth will pick up to around one per cent in the second half of 2025 and through 2026. They project that growth will only approach two per cent in 2027.
