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