No change on Wellington Street.
The Bank of Canada has decided to hold its key interest rate at 2.75 per cent for the third time in a row.
In the summary of its decision, the Bank said trade negotiations with the US remain “fluid” while “new sectoral tariffs continue” and actions south of the border “remain unpredictable.”
But despite the “volatility in global trade” created by the White House, the world economy has been “reasonably resilient,” with China making up for its decline in exports by selling goods elsewhere.
“In Canada, US tariffs are disrupting trade but overall, the economy is showing some resilience so far,” the Bank’s statement explained. “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 per cent 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. Growth in business and household spending is being restrained by uncertainty. Labour market conditions have weakened in sectors affected by trade, but employment has held up in other parts of the economy.”
The Bank’s decision comes just two days before Donald Trump’s deadline for reaching a new US-Canada trade deal.
The US president said today in a post on Truth Social that there would be no extensions on the Aug. 1 cut-off point, adding: “It stands strong.”
Lower tariffs, the Bank explained, “would reduce the direct upward pressure on inflation” while increased tariffs “would increase it.”
The inflation rate across Canada was 1.9 per cent in June.
“We will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs related to tariffs and the reconfiguration of trade,” the Bank said. “If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate.”
The next interest rate decision is set to be announced on Sept. 17.
