Mortgage Blog
Bank of Canada Rate Announcement - April 16, 2025
April 16, 2025 | Posted by: Crescent Mortgage Corp.
The BoC stood on the sidelines today leaving its target for the overnight rate unchanged at 2.75%.
Major shifts to US trade policy and the continuing unpredictability of tariffs have dramatically increased uncertainty, reduced economic growth forecasts, and raised inflation expectations. Uncertain times have led the Bank to present two different scenarios in its April Monetary Policy Report. In one scenario, uncertainty is high while tariffs are limited in scope. In this case, domestic growth weakens in the short term and inflation hovers close to its 2% target. In the other scenario, a drawn-out trade war causes our economy to fall into recession in 2025 and inflation shoots above 3% next year. While only two specific scenarios were outlined, the unusual degree of uncertainty in today’s world and the constant back-and-forth behaviour of the US has made it very difficult to be confident in any forecasts going forward.
Financial markets have been shaken by the constant stream of tariff announcements, postponements and threats of escalation. This instability has led to a substantial decline in oil prices and weaker prospects for global growth.
In Canada, falling consumer and business confidence has led to a reduction in consumption, residential investment and business spending in the first quarter. Trade tensions are also disrupting the labour market, as businesses plan to scale back their hiring of workers.
Inflation came in at 2.3% in March, down from February but still higher than the 1.8% posted in January. The increase in inflation over the past couple of months is a combination of some rebound in goods price inflation and the end of the temporary GST/HST suspension. Lower global oil prices will dampen inflation in the near term. However, tariffs and supply chain disruptions are expected to increase some prices. How much and for how long depends on the how the trade war plays out and how quickly businesses pass on higher costs to consumers.
The BoC emphasized that “Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians.”
The next interest rate announcement is scheduled for June 4, 2025.