The Bank of Canada has announced it is holding its key policy interest rate steady at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%. This decision comes in response to persistent global trade tensions, rising cost pressures, and slower economic growth both in Canada and abroad.
🔍 Why Is the Bank of Canada Holding Rates?
Trade uncertainty is creating major challenges for global economies. While some U.S. trade policies have recently become more clear, new tariffs and threats of escalation continue to affect exports, inflation, and business confidence.
In response, the Bank’s latest Monetary Policy Report (MPR) doesn’t offer a standard forecast. Instead, it presents three possible scenarios for inflation and GDP:
- Current Tariff Scenario: Based on existing tariffs as of July 27
- Escalation Scenario: If trade tensions worsen
- De-escalation Scenario: If tariffs are rolled back
🌎 Global Economic Outlook – July 2025
- Global growth is expected to slow to 2.5% by late 2025, before rebounding toward 3% in 2026–2027.
- In the U.S., inflation is rising slightly as tariffs impact consumer prices. Job growth remains strong.
- The eurozone and China are seeing modest growth, with China shifting exports away from the U.S.
- Oil prices remain stable, equity markets are climbing, and global bond yields are rising.
- The Canadian dollar has strengthened slightly against a weakening U.S. dollar.
🇨🇦 Canada’s Economic Update – July 2025
- GDP declined by 1.5% in Q2 2025 due to weaker exports and reduced U.S. demand.
- Unemployment rose to 6.9% in June 2025.
- Wage growth continues to slow, and indicators show growing economic slack.
- CPI inflation was 1.9% in June, with core inflation (excluding taxes) rising to 2.5%, driven by non-energy goods and shelter costs.
📈 What Happens Next?
According to the Bank, if the economy continues to weaken and inflation pressures ease, there may be room to cut interest rates later in 2025 or early 2026.
However, inflation is still being pushed up by trade-related costs (like finding new suppliers) and high housing prices, which could delay future rate cuts.
🧠 Key Takeaways for Canadians:
- Interest rates remain at 2.75% for now.
- Inflation is steady around 2%, but rising costs and trade disruptions could shift that.
- The Canadian economy is slowing, but showing signs of resilience.
- The Bank is watching for how long tariffs will last and how they affect inflation, jobs, and spending.
💬 Final Word from the Bank of Canada:
“We are focused on ensuring Canadians continue to have confidence in price stability through this period of global upheaval. We will support economic growth while ensuring inflation remains well controlled.”
📚 Stay Updated:
Follow the full statement and future rate announcements at the Bank of Canada’s website.
Source: Bank of Canada
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