Great Mortgages. The Right Insurance. Expert Advice.
Bank of Canada Holds Again – Why and What’s Next?
As widely anticipated, the Bank of Canada maintained its policy interest rate at 2.75% for a third consecutive meeting, and prime rate remains at 4.95%.
As outlined by Tiff Macklem (Governor of the Bank of Canada), the decision to hold the rate reflects three main considerations:
- “First, uncertainty about US tariffs on Canada is still high.”
- “Second, while US tariffs are disrupting trade, Canada’s economy is showing some resiliance so far.”
- “Third, inflation is close to our (Bank of Canada’s) 2% target, but we see evidence of underlying inflation pressures.”
In addition to the interest rate announcement, the Bank of Canada also published its July Monetary Policy Report (MPR), which presents its forecast for economic growth and inflation. Similar to their April report, given “US tariffs are still too unpredictable to be able to provide a single forecast for the Canadian economy (Tiff Macklem)”, the Bank of Canada published 3 different forecasts. A “current tariff scenario” based on tariffs in place or agreed upon as of July 27th, a “tariff escalation scenario”, and a “tariff de-escalation scenario”. We have analyzed the MPR and have included key takeaways in our attached report.
Overall, while the Bank of Canada held steady this meeting, the general consensus among many banks and economists is that we could still see -0.25% to -0.50% of rate cuts before hitting a bottom by the end of 2025 or early 2026. The Bank of Canada also hinted at a possible future rate cut when Tiff Macklem stated, “If a weakening economy puts further downward pressure on inflation and the upward pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate.”
Looking for more information? We have prepared the attached info guide that covers the following topics:
- Why did the Bank of Canada hold their rate steady?
- What were major bank economists expecting, and what could be next?
- What are the key takeaways from the Bank of Canada’s Monetary Policy Report (economic forecast)
- Potential mortgage market implications now and moving forward.
We hope you find this guide helpful. If you would like any additional details about the recent Bank of Canada decision or forecasts, or to review any specific rate/product options given the current interest rate outlook, please let us know, as we’d be happy to help.
