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Making sense of the Bank of Canada interest rate decision on April 16, 2025
By Penelope Graham on April 16, 2025
Estimated reading time: 7 minutes
Created By
Ratehub.ca
By Penelope Graham on April 16, 2025
Estimated reading time: 7 minutes
The BoC noted it is proceeding with caution. Read how its rate hold will impact you, whether you’re a borrower, investor or saver.
As tariff confusion reigns, the Bank of Canada (BoC) has thrown in the towel on trying to forecast what’s next for the Canadian economy. Instead, it says, expect the unexpected.
That was the major message from the central bank in its April rate announcement, in which it held its trend-setting overnight lending rate. It’s unchanged at 2.75%. This brings an end to the rate cutting cycle it had kicked off last June, which brought this trend setting rate down 225 basis points (2.25%) from its peak of 5% via a series of seven consecutive rate decreases.
The BoC made it clear that the ongoing uncertainty as a result of U.S. President Donald Trump’s tariff threats have scuttled any chance of predicting our nation’s growth trajectory with any kind of accuracy, prompting it to take a wait-and-see approach. This, combined with concerns over higher short-term inflation, prompted the Bank to hold off on adding more stimulus to the economy.
“The major shift in direction of U.S. trade policy and the unpredictability of tariffs have increased uncertainty, diminished prospects for economic growth, and raised inflation expectations,” according to the Bank’s announcement. “Pervasive uncertainty makes it unusually challenging to project GDP growth and inflation in Canada and globally.” (Read: What is GDP?)
Instead, the Bank has put forth two potential scenarios for the Canadian economy, depending on the path that the U.S. trade policy may take.
“Many other trade policy scenarios are possible,” the statement reads. “There is also an unusual degree of uncertainty about the economic outcomes within any scenario, since the magnitude and speed of the shift in U.S. trade policy are unprecedented.”
Given this, it made sense for the BoC to keep its cards close and save rate cuts for future emergencies. In the meantime, it’s keeping an eagle eye on factors such as how tariffs evolve, business investment, and the Canadian job market.
Read more of my take on the BoC announcement for Ratehub.ca.
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