BoC Holds Rates Steady Amid Global Economic Uncertainty

The Bank of Canada is choosing caution in the face of mounting global economic headwinds. Its decision to maintain the overnight rate at 2.75% reflects concerns over inflation, but many industry voices are calling for further cuts to ease the burden on mortgage holders and homebuyers.

🔹 Economic stress building: Unemployment has risen to 6.7%, the highest since the pandemic years, while consumer and business confidence continues to fall.
🔹 No relief for borrowers: With U.S. tariffs pressuring Canadian exports and increasing financial strain, many were hoping for a rate cut to ease mortgage payments.
🔹 CMBA-BC urges action: The Canadian Mortgage Brokers Association – BC argues that holding rates steady misses the mark and is calling for targeted government support and meaningful housing policy reforms.

While the hold may signal short-term caution, all eyes are now on the Bank’s next moves in the face of ongoing trade and economic turbulence.

Further Cuts Still Likely Despite the BoC’s Cautious Language

Even with a steady rate today, economists warn that worsening trade tensions and economic softness may force the Bank of Canada to act again before the year ends.

🔹 Trade war uncertainty: U.S. President Trump’s tariffs on steel, aluminum, and other goods continue to disrupt Canada’s economy. The threat of more tariffs looms large.
🔹 BoC treading lightly: Governor Tiff Macklem emphasized the “massive uncertainty” the central bank is facing, but left the door open for future cuts if conditions worsen.
🔹 Rate cuts expected later in 2025: BMO’s economists believe the risks to economic growth will outweigh inflation concerns, making further cuts likely.
🔹 U.S. Fed moves could play a role: While the U.S. Federal Reserve has held steady, it is expected to cut rates later in the year — a move that could ease pressure on the Canadian dollar and give the BoC more room to act.

Despite today’s hold, the overall trend for 2025 could still lean toward lower borrowing costs if global conditions continue to deteriorate.