FX.co ★ Bank of Canada Holds Rate at 2.75%

The Bank of Canada, in its decision for April 2025, maintained its key interest rate at 2.75%, aligning with the expectations of half the market. This marks the first pause following a cumulative reduction of 2.25 percentage points across seven consecutive meetings. The central bank's governing council highlighted the uncertainty associated with the extent of tariffs, which poses downside risks to growth while increasing inflation expectations. This uncertainty necessitates a cautious approach to further monetary easing. The lack of a definitive tariff policy from the United States has led the Bank of Canada to outline two economic scenarios in its latest Monetary Policy Report. If the U.S. limits its tariffs on Canadian goods, the Bank anticipates a temporary weakening in growth with inflation remaining near the 2% target. Conversely, if the U.S. engages in an all-out trade conflict with both Canada and China, the Bank forecasts a recession within the year, with inflation potentially rising to around 3%.