Bank of Canada holds rates steady, ending series of cuts

The Bank of Canada has hit pause on its rate-cutting path, keeping its benchmark interest rate unchanged in April as it weighs up the likely impact to the Canadian economy of US president Donald Trump’s global trade war.  

The central bank said on Wednesday morning it was leaving its overnight rate at the current level of 2.75%, opting against bringing borrowing costs lower again amid lingering concern about the possible effect of Trump’s tariffs on Canadian inflation.  

Money market odds of a rate cut jumped yesterday after the consumer price index (CPI) unexpectedly dipped to 2.3% despite economists’ projections that it would remain unchanged from February at 2.6%.  

But analysts still saw a roughly 50% chance that the Bank would leave rates untouched, with its prior decision (a 25-basis-point cut in March) seeing central bank officials emphasize the need to balance the potential negative economic impact of Trump’s policies – which include steep levies against Canadian steel and aluminum – with upside risks to inflation.  

The move marks the first time in nearly a year that the Bank has left rates unchanged, having introduced seven consecutive cuts since last April and moved that benchmark rate from a two-decade high of 5%.  

Leading banks are likely to leave their own prime rates unchanged – and the Bank’s path ahead on rates for the remainder of 2025 is also unclear. Trump’s tariff war could see prices rise sharply while a potential recession is also looming into view, with the central bank’s first-quarter business outlook survey indicating that around 32% of surveyed firms now expect the economy to see a downturn, up sharply from 15% in Q4.  

Top lenders including TD, Royal Bank of Canada (RBC) and Canadian Imperial Bank of Commerce (CIBC) expect the benchmark rate to land at 2.25% by the end of the year, while Bank of Montreal (BMO) and National Bank see that rate slipping to 2% before January.  

Source CMP
By Fergal McAlinden