Mortgage Blog
Bank of Canada Rate Announcement - June 4, 2025
June 4, 2025 | Posted by: Crescent Mortgage Corp.
As expected, the BoC left its target for the overnight rate unchanged today at 2.75%. This decision was driven by the uncertainty surrounding US tariffs and some unexpected firmness in recent inflation data
Canadian economic growth for the first quarter came in at 2.2%, slightly higher than the BoC had forecast. The pull-forward of exports to the United States (to avoid upcoming tariffs) and inventory accumulation boosted activity. Personal consumption slowed from the pace shown in the fourth quarter of 2024 but continued to grow despite a large drop in consumer confidence. Housing activity was down, led by a sharp drop in resale transactions. The labour market has weakened, particularly in those sectors impacted by tariffs and unemployment has risen to 6.9%. The BoC expects the economy to weaken considerably in the second quarter as exports normalize, and domestic demand remains subdued.
CPI inflation dropped to 1.7% in April, as the elimination of the federal carbon tax reduced inflation by 0.6%. However, if we exclude the impact of taxes, inflation rose 2.3% in April, slightly higher than expectations. Recent surveys suggest households continue to expect that tariffs will raise prices and many businesses say they intend to pass on the costs of higher tariffs to the consumer.
The BoC reiterated that they are focused on ensuring that Canadians continue to have confidence in price stability throughout this period of global uncertainty and that they will support economic growth while ensuring inflation remains well controlled.
The next interest rate announcement is scheduler for July 30, 2025.