The Bank of Canada on Wednesday decided to keep its policy rate at 2.25% as expected, with the central bank governor stressing that high uncertainty makes it difficult to determine the timing and direction of the next interest rate change.
In its latest monetary policy report, the BoC maintained its moderate growth forecast for 2026 and 2027, and expects inflation to remain close to its 2% target over that period.
The central bank decided to keep rates on hold for the second time in a row, saying businesses need time to adjust to the impact of US tariffs, while hiring intentions remain weak.
Markets and economists are divided on the direction of monetary policy, with some expecting further rate cuts to support the economy, while money markets currently expect no cuts until 2026.
The Canadian dollar strengthened after the announcement, while the BoC stressed that the inflationary impact of the tariffs is likely to be offset by lower price pressures from excess supply, although the recovery in economic capacity is expected to take time.
