Bank of Canada Monetary Policy Decision

Monetary Policy Decision Monetary Policy

Source: Bank of Canada
Source Link: https://www.bankofcanada.ca/
Next Release(s): September 17th, 2025 9:45 AM

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The Bank of Canada held its policy rate at 2.75% in July 2025, citing a cautious outlook amid persistent trade uncertainty and mixed inflation signals.
- GDP is estimated to have declined -1.5% QoQ in Q2 2025 following a strong Q1 driven by pre-tariff export pull-forwards.
- CPI inflation rose slightly to 1.9% in June, while core inflation excluding taxes rose to 2.5% YoY, largely on non-energy goods.
- The unemployment rate increased to 6.9% in June, with labor market softness concentrated in trade-sensitive sectors.
- The Bank now assesses excess supply in the economy has grown since January, suggesting increased slack.
- In its base tariff scenario, GDP is expected to rebound modestly (+1.0% H2 2025), but escalation or de-escalation of tariffs could shift the outlook considerably.
Monetary Policy Report: July 2025
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The Bank of Canada held its policy rate at 2.75% in June, citing persistent trade uncertainty and mixed signals on inflation and economic activity.
- Q1 GDP rose 2.2% QoQ annualized, slightly above forecasts, driven by export pull-forwards and inventory gains, while final domestic demand was flat.
- CPI inflation fell to 1.7% in April due to the removal of the federal carbon tax; excluding taxes, inflation rose to 2.3%.
- Core inflation measures ticked up, and businesses expect to pass on tariff-related cost increases to consumers.
- The unemployment rate increased to 6.9%, with job losses concentrated in trade-exposed sectors.
- The Bank signaled caution amid upside inflation risks and downside growth risks, awaiting further clarity on US trade policy impacts.
- Key quote: “With uncertainty about US tariffs still high, the Canadian economy softer but not sharply weaker, and some unexpected firmness in recent inflation data, Governing Council decided to hold the policy rate as we gain more information on US trade policy and its impacts.”
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The Bank of Canada keeps its policy rate at 2.75% and braces for the impacts of US trade policy.
- The BoC notes that US trade policy has “increased uncertainty, diminished prospects for economic growth, and raised inflation expectations.”
- The BoC is trying to balance how tariffs affect the inflation outlook and the growth outlook, and it’s decision to not change the policy rate was out of caution and the need for more information.
- Key quote: "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 BoC highlights two different scenarios. In both, economic activity weakens (though scenario 1 sees a smaller decline than in scenario 2), but in the first scenario, inflation remains contained while in the second, inflation jumps in earl 2026.
- Monetary Policy Report: April 2025
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The Bank of Canada cut its overnight rate by 25 bps to 2.75%.
- The BoC pointed to an increase in uncertainty surrounded the economic outlook as a result of the intensifying trade war with the US: “…heightened trade tensions and tariffs imposed by the United States will likely slow the pace of economic activity and increase inflationary pressures in Canada. The economic outlook continues to be subject to more-than-usual uncertainty because of the rapidly evolving policy landscape.“
- The BoC says that it will try and assess whether future inflation changes are being caused by changes in costs from tariffs or changes in demand flowing to prices.
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