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The Province
6 hours ago
- Business
- The Province
Bank of Canada holds key rate at 2.75% as economy shows resilience to tariffs
Published Jul 30, 2025 • 3 minute read A person sits outside the Bank of Canada in Ottawa on Wednesday, June 4, 2025. The Confederation Building on Parliament Hill is reflected in the windows behind. Photo by Sean Kilpatrick / THE CANADIAN PRESS OTTAWA — Signs of resilience in the Canadian economy were enough for the Bank of Canada to leave its benchmark interest rate unchanged Wednesday, but the spectre of U.S. trade uncertainty continues to cast a shadow over the central bank's decisions. This advertisement has not loaded yet, but your article continues below. THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY Subscribe now to read the latest news in your city and across Canada. Exclusive articles by top sports columnists Patrick Johnston, Ben Kuzma, J.J. Abrams and others. Plus, Canucks Report, Sports and Headline News newsletters and events. Unlimited online access to The Province and 15 news sites with one account. The Province ePaper, an electronic replica of the print edition to view on any device, share and comment on. Daily puzzles and comics, including the New York Times Crossword. Support local journalism. SUBSCRIBE TO UNLOCK MORE ARTICLES Subscribe now to read the latest news in your city and across Canada. Exclusive articles by top sports columnists Patrick Johnston, Ben Kuzma, J.J. Abrams and others. Plus, Canucks Report, Sports and Headline News newsletters and events. Unlimited online access to The Province and 15 news sites with one account. The Province ePaper, an electronic replica of the print edition to view on any device, share and comment on. Daily puzzles and comics, including the New York Times Crossword. Support local journalism. REGISTER / SIGN IN TO UNLOCK MORE ARTICLES Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account. Share your thoughts and join the conversation in the comments. Enjoy additional articles per month. Get email updates from your favourite authors. THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK. Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors The central bank's policy rate remains at 2.75 per cent after a third consecutive hold. Governor Tiff Macklem said in prepared remarks that the governing council's decision came from a 'clear consensus.' With a backdrop of considerable trade uncertainty, Canada's economy has yet to deteriorate sharply in the face of U.S. tariffs and underlying inflation is showing some stubbornness. The Bank of Canada lowers its policy rate when it wants to stimulate the economy but keeps borrowing costs elevated when it's worried inflation will rise. Macklem said the economy is showing 'some resilience' so far, but he also opened the door to lowering rates if growth slows more sharply. 'If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate,' he said. Essential reading for hockey fans who eat, sleep, Canucks, repeat. By signing up you consent to receive the above newsletter from Postmedia Network Inc. Please try again This advertisement has not loaded yet, but your article continues below. Though headline inflation rose two ticks to 1.9 per cent in June, the Bank of Canada sees underlying inflation levels around 2.5 per cent when stripping out volatility and tax changes that are skewing the data. Canada's labour market is showing some weakness in tariff-exposed sectors such as manufacturing, but other industries continue to broadly add jobs. Macklem said the Bank of Canada will be watching how much tariffs affect business activity and demand for Canadian exports, and whether higher costs from those import duties are passed on to customers. U.S. effective tariff rates are 'less than were threatened,' Macklem noted, but are still higher than recent historical experience. The odds of a 'severe and escalating' global trade war have diminished in recent months, he said. This advertisement has not loaded yet, but your article continues below. While U.S. President Donald Trump has recently struck trade deals with the likes of Japan and the European Union, those agreements still come with some level of tariffs. Macklem said the nature of those deals suggest 'the United States is not returning to open trade.' The Bank of Canada published a monetary policy report alongside its rate decision Wednesday, but that report once again did not include a single, central forecast for the economy as the central bank's outlook remains clouded by uncertainty. Instead, the bank offered a scenario based on the current tariff level persisting, and two others that outline both a de-escalation and a further ramp up of tariffs. Each of those case studies sees at least some level of tariffs persisting. This advertisement has not loaded yet, but your article continues below. While it's tricky to get a firm number on what tariff levels look like given a variety of exemptions and overlapping duties, the central bank sees the effective U.S. tariff rate on Canada at roughly seven or eight per cent today, up five percentage points from the start of the year. The bank's monetary policymakers also assume a vast majority of Canadian goods will be exempt from tariffs over the coming years thanks to their compliance with the Canada-U.S.-Mexico Agreement as companies rush to get certified. In the status quo scenario, the Bank of Canada sees the economy rebounding through the rest of this year after an estimated decline of 1.5 per cent in annualized real gross domestic product last quarter. The current tariff scenario has real GDP growth coming in 0.5 percentage points lower in 2025 and 2026 compared to the Bank of Canada's pre-trade war projections in January. This advertisement has not loaded yet, but your article continues below. Inflation would also hold around two per cent through the end of 2027 in this outcome as the forces pushing prices higher are roughly offset by the forces dampening them. A de-escalation scenario would cut U.S. tariffs on Canada in half, putting less upward pressure on inflation and seeing growth rebound faster. Canada's counter-tariffs are also waived in this example. But an escalation outcome would see the United States place a sweeping 10 per cent tariff on all goods from Canada and Mexico _ ignoring the current exemptions for CUSMA compliance — in addition to a threatened 50 per cent tariff on copper imports. Canada would then respond with a 25 per cent tariff on $120 billion of U.S. goods, up from the current tariff scenario of $60 billion. This escalated scenario would see inflation rise and the economy fall into a recession for the rest of 2025. Trump has threatened to impose a 35 per cent duty on Canadian imports starting Friday if a trade deal isn't struck between the countries before then. The Bank of Canada's forecasts don't specifically address the impact of that possible outcome. Vancouver Canucks Columnists News Vancouver Canucks Vancouver Whitecaps
The Market Online
17 hours ago
- Business
- The Market Online
@ the Bell: Steady rates, shaky trade
Canada's top stock index tumbled on Wednesday after the Bank of Canada decided to maintain its interest rate at 2.75 per cent for the third straight time. This move suggests that the Canadian economy has been less affected by the ongoing trade tensions with the United States than previously anticipated. The utilities segment provided meagre gains for what was an otherwise broad decline for the TSX. Meanwhile, US markets were as divided as the citizens of the country as investors reviewed corporate earnings and considered the Federal Reserve's latest interest rate decision. The Fed opted to keep its benchmark rate steady within the 4.25 per cent to 4.5 per cent range, amid growing uncertainty surrounding trade negotiations between the US and China. The Canadian dollar traded for 72.24 cents US compared to 72.57 cents US on Tuesday. US crude futures traded US$1.16 higher at US$70.37 a barrel, and the Brent contract rose US$1.01 to US$73.52 a barrel. The price of gold was down US$53.72 to US$3,273.52. In world markets, the Nikkei was down 19.85 points to ¥40,654.70, the Hang Seng was down 347.52 points to HK$25,176.93, the FTSE was down 0.62of a point to ₤9,136.94, and the DAX was up 44.85 points to €24,262.22. Stockhouse does not provide investment advice or recommendations. All investment decisions should be made based on your own research and consultation with a registered investment professional. The issuer is solely responsible for the accuracy of the information contained herein. For full disclaimer information, please click here .
Hamilton Spectator
18 hours ago
- Business
- Hamilton Spectator
S&P/TSX composite falls nearly 170 points, U.S. markets were mixed
TORONTO - Canada's main stock index saw broad declines Wednesday while U.S. markets were mixed. The S&P/TSX composite index finished 169.92 points lower at 27,369.96 amid broad declines led by the basic materials sector. In New York, the Dow Jones industrial average was down 171.71 points at 44,461.28. The S&P 500 index was down 7.96 points at 6,362.90, while the Nasdaq composite was up 31.38 points at 21,129.67. The Canadian dollar traded for 72.41 cents US compared with 72.62 cents US on Tuesday as the Bank of Canada held its key interest rate at 2.75 per cent Wednesday. The September crude oil contract was up 79 cents US at US$70 per barrel. The December gold contract was down US$28.40 at US$3,352.80 an ounce. This report by The Canadian Press was first published July 30, 2025. Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
France 24
19 hours ago
- Business
- France 24
Canada central bank holds rate steady citing US tariff 'threats'
Canada remains uniquely vulnerable to Trump's trade war given the deep, broad ties between the neighboring economies. Trump's threat to hike tariffs to 35 percent on certain goods if no new trade deal is reached by Friday could wreak further havoc across a Canadian economy already strained by US protectionism. "Let's hope there's an agreement between Canada and the United States. Let's hope it's a good agreement," Bank of Canada Governor Tiff Macklem told reporters after the rate announcement. He conceded, however, that "there is a sense that US policy may well remain unpredictable." "There's a sense going to be hard to restore that trust," in the United States as an economic partner, he added. A statement from the bank said that "while some elements of US trade policy have started to become more concrete in recent weeks, trade negotiations are fluid (and) threats of new sectoral tariffs continue." Tariffs unknown Canada was the first G7 country to begin cutting rates last year, following several hikes to tame pandemic-fuelled inflation. But Wednesday marked the bank's third consecutive pause, caution largely driven by Trump's policies. "It's hard to be as forward-looking as usual when you've got an unusual amount of uncertainty," Macklem said. A central bank forecast released Wednesday outlined a scenario where the impact of new US tariffs could be muted, if new levies do not apply to goods compliant with an existing trade deal Trump signed -- and praised -- during his first term. The bank said 100 percent of energy exports and 95 percent of all other exports -- excluding auto parts -- could be compliant with the United States-Mexico-Canada Agreement (USMCA). Drew Fagan, a tariff policy expert at Toronto's Munk School of Global Affairs, told AFP that if exemptions for USMCA compliant goods hold, Canada does not necessarily need a deal urgently. He cited research showing the average tariff rate on Canadian goods entering the United States is currently two percent. That's "a big increase" compared to the 0.1 percent before Trump took office, but highlights that lots of Canadian goods are still crossing the border tariff free. If Trump decides to ditch the USMCA entirely, "then all bets are off," Fagan said. Carney cautious Targeted sector tariffs are expected to remain, bringing further pain for Canadian auto workers who have seen layoffs and shift cuts triggered by the president's push to have more cars made entirely in the United States. Canada's auto plants are highly integrated with US production sites, with parts crossing the border multiple times during assembly. Canadian Prime Minister Mark Carney has in recent days tried to temper expectations, saying a tariff-free deal with Washington may not be possible. The prime minister, who previously led the Bank of Canada and the Bank of England, has also said a recently agreed US-EU framework is not a template for Canada. "There are differences. One is geographic proximity," he said this week. The Bank of Canada did not rule out rate cuts later this year to help borrowers. "The Bank appears to be getting a little more comfortable with the notion that the Canadian economy will need the support from further interest rate cuts," CIBC economist Andrew Grantham said in statement, reacting to Wednesday's announcement. But Macklem stressed the bank would act if it sees tariffs driving inflation. © 2025 AFP
Yahoo
19 hours ago
- Business
- Yahoo
Bank of Canada signals possible cuts ahead, but holds key policy rate steady for now at 2.75%
The Bank of Canada (BoC) held its overnight interest rate steady at 2.75 per cent on Wednesday, in a move widely expected by economists and informed by still-persistent uncertainty related to U.S. trade tensions. The trade war remained the dominant focus in the announcement, and once again led the BoC to depart from its usual approach by offering a range of future economic scenarios. Governor Tiff Macklem declared that U.S. tariffs and policy are 'still too unpredictable to be able to provide a single forecast.' Macklem also cited resilience in the Canadian economy and 'evidence of underlying inflation pressures' as factors in the decision to hold, but outlined the conditions the Bank would need to see to make further interest rate cuts. 'If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate,' he said. Economists had universally expected a hold, according to a Reuters poll, but their views on the BoC's next moves were less uniform following the announcement. Expectations for a cut at the BoC's upcoming September 17 decision were mixed. At the very least, wrote National Bank of Canada economists Taylor Schleich and Ethan Currie, the explicit mention of what would justify a cut contradicted 'the growing view that the BoC's easing cycle is over.' The BoC's new Monetary Policy Report — a quarterly document that offers forecasts for the economy, inflation and risks — avoided a singular outlook for the second time in a row. The July report includes three scenarios for economic projections. One is based on current tariff conditions, as well as alternatives imagining an escalation and a de-escalation of trade tensions. Economic contraction Although the current scenario involves tariffs lower than what U.S. President Donald Trump had threatened, Macklem said, 'they are still outside post-war historical experience.' None of the scenarios, Macklem noted, involve a complete recovery. "Unfortunately, the sad reality is that tariffs mean the economy is going to work less efficiently. It means there's going to be less income, so there's going to be less consumption. So yes, the economy will resume growing, but it'll be on a permanently lower path." He acknowledged persistently high core inflation, which on its own could hinder further rate cuts, but said the Bank suspects it 'will gradually unwind' — with the Canadian dollar gaining value (which reduces import costs), labour costs falling and the economy in excess supply. The BoC expects an overall contraction of the economy in the second quarter of the year, followed by modest growth for the rest of 2025, Macklem said. Based on that outlook, BMO chief economist Douglas Porter said in a note to investors that the requirements for a September cut are likely high. 'Given the Bank already assumes a deep drop in Q2 economic activity … we will likely need two friendly CPI reports ahead of the next rate decision in September to meaningfully increase the chances of a cut at that time,' Porter said. At Desjardins Group, however, macro strategist Tiago Figueiredo and economist LJ Valencia see a set-up for multiple cuts, noting that reductions are likely in two of the BoC's three scenarios. 'Furthermore, the inflation forecasts in the current tariff scenario appear to be elevated, particularly considering recent figures on tariff revenues collected by the Canadian government, which have been lower than expected,' they wrote. 'That opens the door for inflation to print below expectations over the coming months, and help central bankers gain the confidence needed to deliver stimulus. As a result, we continue to see the Bank of Canada cutting rates three times this year, with the first 25-basis-point cut coming at the next Bank of Canada fixed announcement date in September.' In its June decision, the Bank also held its policy rate steady. Watch Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers' press conference following the rate announcement this morning. Follow Yahoo Finance Canada's live blog for news, updates and analysis of the Bank of Canada's interest rate announcement below. Potential implications of fiscal outlook missing from BoC: Holt The Bank of Canada's lack of clear forward guidance or a base case forecast suggests 'they haven't a clue what to do next,' said Scotiabank analyst Derek Holt. 'I don't find we learned anything new whatsoever about the policy bias from this set of communications,' he added. What was glaringly missing, according to Holt, was mention of the potential implications of the Fall budget or broader fiscal policy efforts outside of sector-specific reports. That might just be the BoC playing it politically safe, but it fails to acknowledge the clear risk posed by potentially large-scale fiscal stimulus that could be rolled out soon, building on the more modest measures announced this summer, he said. 'Fiscal easing could easily substitute for monetary easing if required, or pivot the monetary policy dialogue in the other direction pending what happens to the rest of the picture,' he said. While the threat of tariffs is a big deal for certain sectors, like metals, if tensions don't escalate and future deals follow the same pattern as past agreements with other nations, then the threat to Canada could be exaggerated, Holt added. 'If, say, we get a 15–20% tariff like the US imposed on Japan, the EU, and the UK's slightly lower rate among others, and the administration officials continue to indicate that it's likely to apply only to non-CUSMA/USMCA compliant trade, then 15–20% on 5–10% of our trade is frankly peanuts,' Holt said. Tariff shock must amp up to justify rate cuts: RBC RBC senior economist Claire Fan says the BoC delivered a "nuanced" message on Wednesday, balancing concern about slower growth so far in 2025, with optimism on inflation under U.S. tariffs. In a research report on Wednesday, Fan says the BoC signalled a rate cut is in play if inflation falls due to a weaker economy. The question is, how much weaker? "It would likely take a significantly larger international trade shock than is currently in place to prompt that reaction, and the central bank will also need to continue to take into account fiscal policy loosening, which is better suited to deliver targeted relief to trade impacted sectors than interest rate policy," she wrote. "A significantly more negative outlook, one that resembles spring [2025 forecasts] remains a downside risk," Fan added. "Barring such deterioration and following our base case, we expect the BoC will maintain current rates going forward." Monex pencils in rate cut for October Nick Rees, head of macro research at Monex Canada, says he's penciled in a rate cut for October, albeit with little conviction. Rees called today's announcement "another placeholder decision" in the absence of further certainty over tariffs and the path for inflation, suggesting that further rate cuts may be "some time away." However, according to Rees, the BoC will likely resume cutting earlier than traders expect as the country faces increasing headwinds to growth. Given the lack of fresh guidance on the path for Canadian rates, it's no surprise USDCAD was little changed after the announcement, he added. New BoC economic outlook 'better than originally feared': ATB Financial The Bank of Canada downgraded its base economic growth forecast to 1.3 per cent this year, and 1.1 per cent in 2026. That's a significant drop from the 1.8 per cent it projected for each year back in its January outlook. "In April, they offered no forecast at all - just scenarios, citing heightened tariff uncertainty. This time around they put out a forecast, but they call it a 'current tariff scenario,' and still ran two alternate scenarios," Mark Parsons of ATB Economics wrote on Wednesday. "The current projections are clearly better than originally feared," he added. "Expect the next two inflation reports before the September announcement to carry extra weight. An easing in underlying inflation could tip the scale towards a cut." BoC should cut rates twice this year to support economy, RSM economist says "The Bank of Canada can — and should — cut rates twice this year," said Joe Brusuelas, chief economist at business advisory firm RSM, following the BoC's July 30 rate pause. "Today's decision supports that view and we are confident that rate cuts during the final half of the year will bolster the economy and bring down unemployment." A possible recession depends on the outcome of current trade negotiations rather than the Bank's decision to hold rates, he added. "As the Bank of Canada moves to cut rates, we expect to lower that probability later this year." Small businesses already absorbing costs of U.S. tariffs: CFIB While the Bank of Canada announced its rate pause amid uncertainty around U.S. President Donald Trump's continually escalating trade war, the Canadian Federation of Independent Business (CIFB) says that Canadian small businesses have already been absorbing some or all of the costs associated with U.S. tariffs. On imports from the U.S., nearly seven in 10 small businesses paid the full Canadian tariff, with the median cost of $9,000, a recent CFIB survey shows. As for exports, 63 per cent covered costs directly or shared them with their customers in the United States, paying a median of $22,500. "With a limited financial capacity, SMEs likely won't be able to act in the long-term as a primary economic buffer against tariffs," said Simon Gaudreault, CFIB's chief economist and vice president of research. He warns that without any support, the costs will eventually trickle down to consumers. Slow growth 'leaves the door open' for rate cuts: TD Bank TD Bank economist Andrew Hencic sees inflation guiding Bank of Canada rate decisions for the rest of 2025. In his opening statement to reporters on Wednesday, Governor Tiff Macklem said, "If a weakening economy puts further downward pressure on inflation, and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate." The BoC sees the economy contracting 1.5 per cent on a quarterly basis in the second quarter, before recovering later in the year. At the same time, the bank expects inflation to stay close to its two per cent target under its "current tariff scenario." Canada's annual inflation rate rose to 1.9 per cent in June from 1.7 per cent in May, according to Statistics Canada. "The outlook for the economy under the current tariff regime shows a modest recovery starting in the third quarter, but with an economy expanding below trend," Hencic wrote in a report on Wednesday. "This leaves the door open for future rate cut(s) under stable inflation." Fixed and variable mortgage rates expected to stay in low-to-mid 4 per cent range: Mortgage expert Canada's housing market remains largely unchanged since the Bank of Canada's last rate hold in June, according to mortgage and real estate expert Victor Tran of 'Mortgage rates remain sticky,' he said. Canadians holding floating rate products, such as HELOCs or adjustable variable-rate mortgages, won't be experiencing payment relief in the near-term. Canadians taking out new mortgages or renewing can expect mortgage rates for fixed and variable-rate mortgages in the low to mid 4 per cent range, Tran says. Era of synchronized central banks may be ending, IG Wealth Management strategist says "The market is waking up to the idea that the easy part of the cutting cycle is behind us," said Pierre-Benoit Gauthier, vice-president of investment strategy at IG Wealth Management. Markets predict a roughly 66 per cent chance there will be a single cut by the end of the year. Meanwhile, in the U.S., markets expect another two cuts in 2025. "With rate differentials potentially changing soon, the loonie has some room to stay firm," Gauthier said. While political pressure for the Federal Reserve to cut is building, it's largely speculated the U.S. will announce another pause later today. However, if markets are right, "the era of synchronized central banking may be coming to an end soon," he said. Desjardins' Mendes: BoC 'setting up to deliver more monetary easing as early as this September' Although Macklem noted 'a clear consensus to hold' the overnight rate this time, two of the BoC's three scenarios in the MPR 'hint at a need for further rate cuts down the road,' says Desjardins Group economist Royce Mendes in a note to investors. The BoC's current tariff scenario projects core inflation to stay around 3.1 per cent in the last two quarters, Mendes says. However, data on retaliatory tariff collection suggests that number may be too high, he says, 'leaving room for core inflation to undershoot, particularly in the fourth quarter.' With that in mind, he writes, 'it looks like central bankers are setting up to deliver more monetary easing as early as this September.' BoC rate pause may spur fall housing activity, says Royal LePage CEO Although today's BoC rate pause was driven by tariff-related uncertainty, Royal LePage CEO Phil Soper says it could provide some reassurance to prospective homebuyers. "For real estate markets, it's likely more people who need to upgrade their housing will decide they can wait no longer, spurring activity heading into the fall." "Economic fundamentals, from strong employment to much improved affordability, are supporting conditions for growth in the housing market, along with material demand waiting in the wings." BMO chief economist Porter: Those seeking cuts may need to be patient In a note to clients, BMO chief economist Douglas Porter says the BoC is 'keeping the door fully open to the possibility of future rate cuts.' But Porter doesn't see good odds of that happening in September. Because the BoC expects the economy to contract in Q2, he says, 'we will likely need two friendly CPI reports ahead of the next rate decision in September to meaningfully increase the chances of a cut at that time.' However, he cautions, two consecutive months of acceptable inflation data 'may be a tall hurdle, so those looking for cuts may need to pack their patience." Porter also says the BoC's escalation and de-escalation scenarios are 'a nice way to handle the current either/or' of the trade war. 'There's simply too much lingering trade uncertainty for the BoC to be decisive on the outlook for now.' Macklem on protectionism: The world is fragmenting The uncertain state of global trade was once again front-and-centre in the Bank of Canada's latest rate announcement and Monetary Policy Report on Wednesday. Speaking to reporters in Ottawa, Governor Tiff Macklem addressed the issue of rising protectionist sentiment in the United States and other countries. "The world is fragmenting, and you know, that is going to have an impact," he said. "Some segments of society feel like they've lost out. That is having political consequences." "President Trump has dramatically increased U.S. protectionism. The effective U.S. tariff rate with the agreements that have been reached has increased significantly, and that's going to have an impact on the world economy," Macklem added. "Even before President Trump was elected, trade has been shifting." Rogers says defence spending boost could support Canada's productivity Canada's substantial increase in defence spending will likely, in the long run, help productivity in Canada, says BoC Senior Deputy Governor Carolyn Rogers. Prime Minister Mark Carney has committed to raising defence-related spending to the equivalent of five per cent of Canada's gross domestic product by 2035. 'What we want to see is those investments in our own economy so that they build our own capacity, [and] they generate some economic activity within Canada,' Rogers said. She noted the effects won't be immediate but said she's optimistic it will be net positive to productivity. Macklem: 'Trust is going to be hard to restore' ahead of 2026 CUSMA renegotiation North America's trilateral trade deal, known in Canada as the Canada-United States-Mexico Agreement (CUSMA), is due for review in 2026. Under current Canada-U.S. tariffs, a vast swath of goods compliant with this deal are exempt from levies. In its "current tariffs scenario" outlined in its newly released Monetary Policy Report, the Bank of Canada estimates CUSMA-compliance at 95 per cent for non-energy exports. "There is a sense that U.S. policy may well remain unpredictable. There is a sense that trust is going to be hard to restore," BoC Governor Tiff Macklem told reporters on Wednesday. "I think some level of uncertainty will continue, and in the scenarios, particularly the current tariff scenario, and the escalation scenario, we do have a fair amount of uncertainty through much of the projection. It does diminish over time, but it's not falling off quickly." U.S. President Donald Trump signed CUSMA during his first presidency in 2018. Macklem stays cautious on future of rate cuts Bank of Canada Governor Tiff Macklem remains cautious on commenting whether there will be a rate cut this year. "Our future decisions are going to depend on what happens in the future," he said, adding: "We continue to proceed carefully." "Given the unusual amount of uncertainty, we're continuing to put more weight on the risks, and we're ready to respond to new information," Macklem said. BoC's cautious tone, rate-cut readiness could push loonie towards 1.39 "There's light at the end of the tunnel for the Canadian economy and the loonie, but it remains far off in the distance," said Karl Schamotta, chief market strategist at Corpay, in response to the Bank of Canada's rate pause. In today's BoC announcement, Governor Tiff Macklem said that due to the unusual degree of uncertainty, the BoC has to put more weight on risks, consider a shorter horizon than usual, and be ready to respond to new information. Schamotta says this "far from optimistic" economic outlook, paired with the Bank's readiness to resume easing, should keep the Canadian dollar under pressure, "potentially putting it on course to challenge the 1.39 mark before September, especially if the greenback resumes its appreciation." 'The Bank is inching closer to a cut': CIBC CIBC economist Andrew Grantham sees hints the BoC is "inching closer to a cut" in the central bank's Monetary Policy Report released on Wednesday. He points to a weaker estimate for economic growth in the second quarter from the Bank's policymakers. "The Bank appears to be getting a little more comfortable with the notion that the Canadian economy will need the support from further interest rate cuts in the future," Grantham wrote in a report following today's rate announcement. "However, it is clearly not there yet, and upcoming data will remain more important than today's slight change in language in determining if that support comes at the September meeting as we currently forecast." Bank of Canada to cut rates twice more in 2025, bringing overnight rate to 2.25%: Vanguard Canada The Canadian arm of mutual fund and exchange-traded fund giant Vanguard now expects the Bank of Canada to cut rates twice more in 2025, following Wednesday's decision to hold. "Despite leaving rates unchanged, we expect the BoC to reduce its policy rate to 2.25 per cent by the end of the year, given a lower growth environment,' Vanguard Canada chief investment strategist Ashish Dewan stated in a news release after Wednesday's announcement. "Although the 'uncertainty tax' has already shown signs of impacting the Canadian labour market and business investment, a 2.9 per cent year-over-year increase in CPI-median data in March, one of the BoC's preferred measures of inflation, coupled with uncertainty around the economic outlook from U.S. tariffs, gave the central bank reasons to pause rate cuts." Key takeaways from Macklem's opening statement On Canada-U.S. trade war: "Some tariff agreements have been negotiated between the United States and its trading partners, and that has reduced the risk of a severe and escalating global trade war. Unfortunately, the tariffs in those agreements also suggest the United States is not returning to open trade." No normal forecast: "U.S. tariffs are still too unpredictable to be able to provide a single forecast for the Canadian economy." The BoC once again opted against a conventional forecast due to ongoing U.S. tariff uncertainty. Today's Monetary Policy Report includes three scenarios. A "current view," and two more looking at an escalation or de-escalation. Optimism on inflation: "There are reasons to think that the recent increase in underlying inflation will gradually unwind. The Canadian dollar has appreciated, which reduces import costs. Growth in unit labour costs has moderated, and the economy is in excess supply." "At the same time, tariffs impose new direct costs, which will be gradually passed through to consumers. In the current tariff scenario, upside and downside pressures roughly balance out, so inflation remains close to two per cent." A clear consensus to hold, for now: "There was clear consensus to hold our policy rate unchanged." "If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate." Potential implications of fiscal outlook missing from BoC: Holt The Bank of Canada's lack of clear forward guidance or a base case forecast suggests 'they haven't a clue what to do next,' said Scotiabank analyst Derek Holt. 'I don't find we learned anything new whatsoever about the policy bias from this set of communications,' he added. What was glaringly missing, according to Holt, was mention of the potential implications of the Fall budget or broader fiscal policy efforts outside of sector-specific reports. That might just be the BoC playing it politically safe, but it fails to acknowledge the clear risk posed by potentially large-scale fiscal stimulus that could be rolled out soon, building on the more modest measures announced this summer, he said. 'Fiscal easing could easily substitute for monetary easing if required, or pivot the monetary policy dialogue in the other direction pending what happens to the rest of the picture,' he said. While the threat of tariffs is a big deal for certain sectors, like metals, if tensions don't escalate and future deals follow the same pattern as past agreements with other nations, then the threat to Canada could be exaggerated, Holt added. 'If, say, we get a 15–20% tariff like the US imposed on Japan, the EU, and the UK's slightly lower rate among others, and the administration officials continue to indicate that it's likely to apply only to non-CUSMA/USMCA compliant trade, then 15–20% on 5–10% of our trade is frankly peanuts,' Holt said. The Bank of Canada's lack of clear forward guidance or a base case forecast suggests 'they haven't a clue what to do next,' said Scotiabank analyst Derek Holt. 'I don't find we learned anything new whatsoever about the policy bias from this set of communications,' he added. What was glaringly missing, according to Holt, was mention of the potential implications of the Fall budget or broader fiscal policy efforts outside of sector-specific reports. That might just be the BoC playing it politically safe, but it fails to acknowledge the clear risk posed by potentially large-scale fiscal stimulus that could be rolled out soon, building on the more modest measures announced this summer, he said. 'Fiscal easing could easily substitute for monetary easing if required, or pivot the monetary policy dialogue in the other direction pending what happens to the rest of the picture,' he said. While the threat of tariffs is a big deal for certain sectors, like metals, if tensions don't escalate and future deals follow the same pattern as past agreements with other nations, then the threat to Canada could be exaggerated, Holt added. 'If, say, we get a 15–20% tariff like the US imposed on Japan, the EU, and the UK's slightly lower rate among others, and the administration officials continue to indicate that it's likely to apply only to non-CUSMA/USMCA compliant trade, then 15–20% on 5–10% of our trade is frankly peanuts,' Holt said. Tariff shock must amp up to justify rate cuts: RBC RBC senior economist Claire Fan says the BoC delivered a "nuanced" message on Wednesday, balancing concern about slower growth so far in 2025, with optimism on inflation under U.S. tariffs. In a research report on Wednesday, Fan says the BoC signalled a rate cut is in play if inflation falls due to a weaker economy. The question is, how much weaker? "It would likely take a significantly larger international trade shock than is currently in place to prompt that reaction, and the central bank will also need to continue to take into account fiscal policy loosening, which is better suited to deliver targeted relief to trade impacted sectors than interest rate policy," she wrote. "A significantly more negative outlook, one that resembles spring [2025 forecasts] remains a downside risk," Fan added. "Barring such deterioration and following our base case, we expect the BoC will maintain current rates going forward." RBC senior economist Claire Fan says the BoC delivered a "nuanced" message on Wednesday, balancing concern about slower growth so far in 2025, with optimism on inflation under U.S. tariffs. In a research report on Wednesday, Fan says the BoC signalled a rate cut is in play if inflation falls due to a weaker economy. The question is, how much weaker? "It would likely take a significantly larger international trade shock than is currently in place to prompt that reaction, and the central bank will also need to continue to take into account fiscal policy loosening, which is better suited to deliver targeted relief to trade impacted sectors than interest rate policy," she wrote. "A significantly more negative outlook, one that resembles spring [2025 forecasts] remains a downside risk," Fan added. "Barring such deterioration and following our base case, we expect the BoC will maintain current rates going forward." Monex pencils in rate cut for October Nick Rees, head of macro research at Monex Canada, says he's penciled in a rate cut for October, albeit with little conviction. Rees called today's announcement "another placeholder decision" in the absence of further certainty over tariffs and the path for inflation, suggesting that further rate cuts may be "some time away." However, according to Rees, the BoC will likely resume cutting earlier than traders expect as the country faces increasing headwinds to growth. Given the lack of fresh guidance on the path for Canadian rates, it's no surprise USDCAD was little changed after the announcement, he added. Nick Rees, head of macro research at Monex Canada, says he's penciled in a rate cut for October, albeit with little conviction. Rees called today's announcement "another placeholder decision" in the absence of further certainty over tariffs and the path for inflation, suggesting that further rate cuts may be "some time away." However, according to Rees, the BoC will likely resume cutting earlier than traders expect as the country faces increasing headwinds to growth. Given the lack of fresh guidance on the path for Canadian rates, it's no surprise USDCAD was little changed after the announcement, he added. New BoC economic outlook 'better than originally feared': ATB Financial The Bank of Canada downgraded its base economic growth forecast to 1.3 per cent this year, and 1.1 per cent in 2026. That's a significant drop from the 1.8 per cent it projected for each year back in its January outlook. "In April, they offered no forecast at all - just scenarios, citing heightened tariff uncertainty. This time around they put out a forecast, but they call it a 'current tariff scenario,' and still ran two alternate scenarios," Mark Parsons of ATB Economics wrote on Wednesday. "The current projections are clearly better than originally feared," he added. "Expect the next two inflation reports before the September announcement to carry extra weight. An easing in underlying inflation could tip the scale towards a cut." The Bank of Canada downgraded its base economic growth forecast to 1.3 per cent this year, and 1.1 per cent in 2026. That's a significant drop from the 1.8 per cent it projected for each year back in its January outlook. "In April, they offered no forecast at all - just scenarios, citing heightened tariff uncertainty. This time around they put out a forecast, but they call it a 'current tariff scenario,' and still ran two alternate scenarios," Mark Parsons of ATB Economics wrote on Wednesday. "The current projections are clearly better than originally feared," he added. "Expect the next two inflation reports before the September announcement to carry extra weight. An easing in underlying inflation could tip the scale towards a cut." BoC should cut rates twice this year to support economy, RSM economist says "The Bank of Canada can — and should — cut rates twice this year," said Joe Brusuelas, chief economist at business advisory firm RSM, following the BoC's July 30 rate pause. "Today's decision supports that view and we are confident that rate cuts during the final half of the year will bolster the economy and bring down unemployment." A possible recession depends on the outcome of current trade negotiations rather than the Bank's decision to hold rates, he added. "As the Bank of Canada moves to cut rates, we expect to lower that probability later this year." "The Bank of Canada can — and should — cut rates twice this year," said Joe Brusuelas, chief economist at business advisory firm RSM, following the BoC's July 30 rate pause. "Today's decision supports that view and we are confident that rate cuts during the final half of the year will bolster the economy and bring down unemployment." A possible recession depends on the outcome of current trade negotiations rather than the Bank's decision to hold rates, he added. "As the Bank of Canada moves to cut rates, we expect to lower that probability later this year." Small businesses already absorbing costs of U.S. tariffs: CFIB While the Bank of Canada announced its rate pause amid uncertainty around U.S. President Donald Trump's continually escalating trade war, the Canadian Federation of Independent Business (CIFB) says that Canadian small businesses have already been absorbing some or all of the costs associated with U.S. tariffs. On imports from the U.S., nearly seven in 10 small businesses paid the full Canadian tariff, with the median cost of $9,000, a recent CFIB survey shows. As for exports, 63 per cent covered costs directly or shared them with their customers in the United States, paying a median of $22,500. "With a limited financial capacity, SMEs likely won't be able to act in the long-term as a primary economic buffer against tariffs," said Simon Gaudreault, CFIB's chief economist and vice president of research. He warns that without any support, the costs will eventually trickle down to consumers. While the Bank of Canada announced its rate pause amid uncertainty around U.S. President Donald Trump's continually escalating trade war, the Canadian Federation of Independent Business (CIFB) says that Canadian small businesses have already been absorbing some or all of the costs associated with U.S. tariffs. On imports from the U.S., nearly seven in 10 small businesses paid the full Canadian tariff, with the median cost of $9,000, a recent CFIB survey shows. As for exports, 63 per cent covered costs directly or shared them with their customers in the United States, paying a median of $22,500. "With a limited financial capacity, SMEs likely won't be able to act in the long-term as a primary economic buffer against tariffs," said Simon Gaudreault, CFIB's chief economist and vice president of research. He warns that without any support, the costs will eventually trickle down to consumers. Slow growth 'leaves the door open' for rate cuts: TD Bank TD Bank economist Andrew Hencic sees inflation guiding Bank of Canada rate decisions for the rest of 2025. In his opening statement to reporters on Wednesday, Governor Tiff Macklem said, "If a weakening economy puts further downward pressure on inflation, and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate." The BoC sees the economy contracting 1.5 per cent on a quarterly basis in the second quarter, before recovering later in the year. At the same time, the bank expects inflation to stay close to its two per cent target under its "current tariff scenario." Canada's annual inflation rate rose to 1.9 per cent in June from 1.7 per cent in May, according to Statistics Canada. "The outlook for the economy under the current tariff regime shows a modest recovery starting in the third quarter, but with an economy expanding below trend," Hencic wrote in a report on Wednesday. "This leaves the door open for future rate cut(s) under stable inflation." TD Bank economist Andrew Hencic sees inflation guiding Bank of Canada rate decisions for the rest of 2025. In his opening statement to reporters on Wednesday, Governor Tiff Macklem said, "If a weakening economy puts further downward pressure on inflation, and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate." The BoC sees the economy contracting 1.5 per cent on a quarterly basis in the second quarter, before recovering later in the year. At the same time, the bank expects inflation to stay close to its two per cent target under its "current tariff scenario." Canada's annual inflation rate rose to 1.9 per cent in June from 1.7 per cent in May, according to Statistics Canada. "The outlook for the economy under the current tariff regime shows a modest recovery starting in the third quarter, but with an economy expanding below trend," Hencic wrote in a report on Wednesday. "This leaves the door open for future rate cut(s) under stable inflation." Fixed and variable mortgage rates expected to stay in low-to-mid 4 per cent range: Mortgage expert Canada's housing market remains largely unchanged since the Bank of Canada's last rate hold in June, according to mortgage and real estate expert Victor Tran of 'Mortgage rates remain sticky,' he said. Canadians holding floating rate products, such as HELOCs or adjustable variable-rate mortgages, won't be experiencing payment relief in the near-term. Canadians taking out new mortgages or renewing can expect mortgage rates for fixed and variable-rate mortgages in the low to mid 4 per cent range, Tran says. Canada's housing market remains largely unchanged since the Bank of Canada's last rate hold in June, according to mortgage and real estate expert Victor Tran of 'Mortgage rates remain sticky,' he said. Canadians holding floating rate products, such as HELOCs or adjustable variable-rate mortgages, won't be experiencing payment relief in the near-term. Canadians taking out new mortgages or renewing can expect mortgage rates for fixed and variable-rate mortgages in the low to mid 4 per cent range, Tran says. Era of synchronized central banks may be ending, IG Wealth Management strategist says "The market is waking up to the idea that the easy part of the cutting cycle is behind us," said Pierre-Benoit Gauthier, vice-president of investment strategy at IG Wealth Management. Markets predict a roughly 66 per cent chance there will be a single cut by the end of the year. Meanwhile, in the U.S., markets expect another two cuts in 2025. "With rate differentials potentially changing soon, the loonie has some room to stay firm," Gauthier said. While political pressure for the Federal Reserve to cut is building, it's largely speculated the U.S. will announce another pause later today. However, if markets are right, "the era of synchronized central banking may be coming to an end soon," he said. "The market is waking up to the idea that the easy part of the cutting cycle is behind us," said Pierre-Benoit Gauthier, vice-president of investment strategy at IG Wealth Management. Markets predict a roughly 66 per cent chance there will be a single cut by the end of the year. Meanwhile, in the U.S., markets expect another two cuts in 2025. "With rate differentials potentially changing soon, the loonie has some room to stay firm," Gauthier said. While political pressure for the Federal Reserve to cut is building, it's largely speculated the U.S. will announce another pause later today. However, if markets are right, "the era of synchronized central banking may be coming to an end soon," he said. Desjardins' Mendes: BoC 'setting up to deliver more monetary easing as early as this September' Although Macklem noted 'a clear consensus to hold' the overnight rate this time, two of the BoC's three scenarios in the MPR 'hint at a need for further rate cuts down the road,' says Desjardins Group economist Royce Mendes in a note to investors. The BoC's current tariff scenario projects core inflation to stay around 3.1 per cent in the last two quarters, Mendes says. However, data on retaliatory tariff collection suggests that number may be too high, he says, 'leaving room for core inflation to undershoot, particularly in the fourth quarter.' With that in mind, he writes, 'it looks like central bankers are setting up to deliver more monetary easing as early as this September.' Although Macklem noted 'a clear consensus to hold' the overnight rate this time, two of the BoC's three scenarios in the MPR 'hint at a need for further rate cuts down the road,' says Desjardins Group economist Royce Mendes in a note to investors. The BoC's current tariff scenario projects core inflation to stay around 3.1 per cent in the last two quarters, Mendes says. However, data on retaliatory tariff collection suggests that number may be too high, he says, 'leaving room for core inflation to undershoot, particularly in the fourth quarter.' With that in mind, he writes, 'it looks like central bankers are setting up to deliver more monetary easing as early as this September.' BoC rate pause may spur fall housing activity, says Royal LePage CEO Although today's BoC rate pause was driven by tariff-related uncertainty, Royal LePage CEO Phil Soper says it could provide some reassurance to prospective homebuyers. "For real estate markets, it's likely more people who need to upgrade their housing will decide they can wait no longer, spurring activity heading into the fall." "Economic fundamentals, from strong employment to much improved affordability, are supporting conditions for growth in the housing market, along with material demand waiting in the wings." Although today's BoC rate pause was driven by tariff-related uncertainty, Royal LePage CEO Phil Soper says it could provide some reassurance to prospective homebuyers. "For real estate markets, it's likely more people who need to upgrade their housing will decide they can wait no longer, spurring activity heading into the fall." "Economic fundamentals, from strong employment to much improved affordability, are supporting conditions for growth in the housing market, along with material demand waiting in the wings." BMO chief economist Porter: Those seeking cuts may need to be patient In a note to clients, BMO chief economist Douglas Porter says the BoC is 'keeping the door fully open to the possibility of future rate cuts.' But Porter doesn't see good odds of that happening in September. Because the BoC expects the economy to contract in Q2, he says, 'we will likely need two friendly CPI reports ahead of the next rate decision in September to meaningfully increase the chances of a cut at that time.' However, he cautions, two consecutive months of acceptable inflation data 'may be a tall hurdle, so those looking for cuts may need to pack their patience." Porter also says the BoC's escalation and de-escalation scenarios are 'a nice way to handle the current either/or' of the trade war. 'There's simply too much lingering trade uncertainty for the BoC to be decisive on the outlook for now.' In a note to clients, BMO chief economist Douglas Porter says the BoC is 'keeping the door fully open to the possibility of future rate cuts.' But Porter doesn't see good odds of that happening in September. Because the BoC expects the economy to contract in Q2, he says, 'we will likely need two friendly CPI reports ahead of the next rate decision in September to meaningfully increase the chances of a cut at that time.' However, he cautions, two consecutive months of acceptable inflation data 'may be a tall hurdle, so those looking for cuts may need to pack their patience." Porter also says the BoC's escalation and de-escalation scenarios are 'a nice way to handle the current either/or' of the trade war. 'There's simply too much lingering trade uncertainty for the BoC to be decisive on the outlook for now.' Macklem on protectionism: The world is fragmenting The uncertain state of global trade was once again front-and-centre in the Bank of Canada's latest rate announcement and Monetary Policy Report on Wednesday. Speaking to reporters in Ottawa, Governor Tiff Macklem addressed the issue of rising protectionist sentiment in the United States and other countries. "The world is fragmenting, and you know, that is going to have an impact," he said. "Some segments of society feel like they've lost out. That is having political consequences." "President Trump has dramatically increased U.S. protectionism. The effective U.S. tariff rate with the agreements that have been reached has increased significantly, and that's going to have an impact on the world economy," Macklem added. "Even before President Trump was elected, trade has been shifting." The uncertain state of global trade was once again front-and-centre in the Bank of Canada's latest rate announcement and Monetary Policy Report on Wednesday. Speaking to reporters in Ottawa, Governor Tiff Macklem addressed the issue of rising protectionist sentiment in the United States and other countries. "The world is fragmenting, and you know, that is going to have an impact," he said. "Some segments of society feel like they've lost out. That is having political consequences." "President Trump has dramatically increased U.S. protectionism. The effective U.S. tariff rate with the agreements that have been reached has increased significantly, and that's going to have an impact on the world economy," Macklem added. "Even before President Trump was elected, trade has been shifting." Rogers says defence spending boost could support Canada's productivity Canada's substantial increase in defence spending will likely, in the long run, help productivity in Canada, says BoC Senior Deputy Governor Carolyn Rogers. Prime Minister Mark Carney has committed to raising defence-related spending to the equivalent of five per cent of Canada's gross domestic product by 2035. 'What we want to see is those investments in our own economy so that they build our own capacity, [and] they generate some economic activity within Canada,' Rogers said. She noted the effects won't be immediate but said she's optimistic it will be net positive to productivity. Canada's substantial increase in defence spending will likely, in the long run, help productivity in Canada, says BoC Senior Deputy Governor Carolyn Rogers. Prime Minister Mark Carney has committed to raising defence-related spending to the equivalent of five per cent of Canada's gross domestic product by 2035. 'What we want to see is those investments in our own economy so that they build our own capacity, [and] they generate some economic activity within Canada,' Rogers said. She noted the effects won't be immediate but said she's optimistic it will be net positive to productivity. Macklem: 'Trust is going to be hard to restore' ahead of 2026 CUSMA renegotiation North America's trilateral trade deal, known in Canada as the Canada-United States-Mexico Agreement (CUSMA), is due for review in 2026. Under current Canada-U.S. tariffs, a vast swath of goods compliant with this deal are exempt from levies. In its "current tariffs scenario" outlined in its newly released Monetary Policy Report, the Bank of Canada estimates CUSMA-compliance at 95 per cent for non-energy exports. "There is a sense that U.S. policy may well remain unpredictable. There is a sense that trust is going to be hard to restore," BoC Governor Tiff Macklem told reporters on Wednesday. "I think some level of uncertainty will continue, and in the scenarios, particularly the current tariff scenario, and the escalation scenario, we do have a fair amount of uncertainty through much of the projection. It does diminish over time, but it's not falling off quickly." U.S. President Donald Trump signed CUSMA during his first presidency in 2018. North America's trilateral trade deal, known in Canada as the Canada-United States-Mexico Agreement (CUSMA), is due for review in 2026. Under current Canada-U.S. tariffs, a vast swath of goods compliant with this deal are exempt from levies. In its "current tariffs scenario" outlined in its newly released Monetary Policy Report, the Bank of Canada estimates CUSMA-compliance at 95 per cent for non-energy exports. "There is a sense that U.S. policy may well remain unpredictable. There is a sense that trust is going to be hard to restore," BoC Governor Tiff Macklem told reporters on Wednesday. "I think some level of uncertainty will continue, and in the scenarios, particularly the current tariff scenario, and the escalation scenario, we do have a fair amount of uncertainty through much of the projection. It does diminish over time, but it's not falling off quickly." U.S. President Donald Trump signed CUSMA during his first presidency in 2018. Macklem stays cautious on future of rate cuts Bank of Canada Governor Tiff Macklem remains cautious on commenting whether there will be a rate cut this year. "Our future decisions are going to depend on what happens in the future," he said, adding: "We continue to proceed carefully." "Given the unusual amount of uncertainty, we're continuing to put more weight on the risks, and we're ready to respond to new information," Macklem said. Bank of Canada Governor Tiff Macklem remains cautious on commenting whether there will be a rate cut this year. "Our future decisions are going to depend on what happens in the future," he said, adding: "We continue to proceed carefully." "Given the unusual amount of uncertainty, we're continuing to put more weight on the risks, and we're ready to respond to new information," Macklem said. BoC's cautious tone, rate-cut readiness could push loonie towards 1.39 "There's light at the end of the tunnel for the Canadian economy and the loonie, but it remains far off in the distance," said Karl Schamotta, chief market strategist at Corpay, in response to the Bank of Canada's rate pause. In today's BoC announcement, Governor Tiff Macklem said that due to the unusual degree of uncertainty, the BoC has to put more weight on risks, consider a shorter horizon than usual, and be ready to respond to new information. Schamotta says this "far from optimistic" economic outlook, paired with the Bank's readiness to resume easing, should keep the Canadian dollar under pressure, "potentially putting it on course to challenge the 1.39 mark before September, especially if the greenback resumes its appreciation." "There's light at the end of the tunnel for the Canadian economy and the loonie, but it remains far off in the distance," said Karl Schamotta, chief market strategist at Corpay, in response to the Bank of Canada's rate pause. In today's BoC announcement, Governor Tiff Macklem said that due to the unusual degree of uncertainty, the BoC has to put more weight on risks, consider a shorter horizon than usual, and be ready to respond to new information. Schamotta says this "far from optimistic" economic outlook, paired with the Bank's readiness to resume easing, should keep the Canadian dollar under pressure, "potentially putting it on course to challenge the 1.39 mark before September, especially if the greenback resumes its appreciation." 'The Bank is inching closer to a cut': CIBC CIBC economist Andrew Grantham sees hints the BoC is "inching closer to a cut" in the central bank's Monetary Policy Report released on Wednesday. He points to a weaker estimate for economic growth in the second quarter from the Bank's policymakers. "The Bank appears to be getting a little more comfortable with the notion that the Canadian economy will need the support from further interest rate cuts in the future," Grantham wrote in a report following today's rate announcement. "However, it is clearly not there yet, and upcoming data will remain more important than today's slight change in language in determining if that support comes at the September meeting as we currently forecast." CIBC economist Andrew Grantham sees hints the BoC is "inching closer to a cut" in the central bank's Monetary Policy Report released on Wednesday. He points to a weaker estimate for economic growth in the second quarter from the Bank's policymakers. "The Bank appears to be getting a little more comfortable with the notion that the Canadian economy will need the support from further interest rate cuts in the future," Grantham wrote in a report following today's rate announcement. "However, it is clearly not there yet, and upcoming data will remain more important than today's slight change in language in determining if that support comes at the September meeting as we currently forecast." Bank of Canada to cut rates twice more in 2025, bringing overnight rate to 2.25%: Vanguard Canada The Canadian arm of mutual fund and exchange-traded fund giant Vanguard now expects the Bank of Canada to cut rates twice more in 2025, following Wednesday's decision to hold. "Despite leaving rates unchanged, we expect the BoC to reduce its policy rate to 2.25 per cent by the end of the year, given a lower growth environment,' Vanguard Canada chief investment strategist Ashish Dewan stated in a news release after Wednesday's announcement. "Although the 'uncertainty tax' has already shown signs of impacting the Canadian labour market and business investment, a 2.9 per cent year-over-year increase in CPI-median data in March, one of the BoC's preferred measures of inflation, coupled with uncertainty around the economic outlook from U.S. tariffs, gave the central bank reasons to pause rate cuts." The Canadian arm of mutual fund and exchange-traded fund giant Vanguard now expects the Bank of Canada to cut rates twice more in 2025, following Wednesday's decision to hold. "Despite leaving rates unchanged, we expect the BoC to reduce its policy rate to 2.25 per cent by the end of the year, given a lower growth environment,' Vanguard Canada chief investment strategist Ashish Dewan stated in a news release after Wednesday's announcement. "Although the 'uncertainty tax' has already shown signs of impacting the Canadian labour market and business investment, a 2.9 per cent year-over-year increase in CPI-median data in March, one of the BoC's preferred measures of inflation, coupled with uncertainty around the economic outlook from U.S. tariffs, gave the central bank reasons to pause rate cuts." Key takeaways from Macklem's opening statement On Canada-U.S. trade war: "Some tariff agreements have been negotiated between the United States and its trading partners, and that has reduced the risk of a severe and escalating global trade war. Unfortunately, the tariffs in those agreements also suggest the United States is not returning to open trade." No normal forecast: "U.S. tariffs are still too unpredictable to be able to provide a single forecast for the Canadian economy." The BoC once again opted against a conventional forecast due to ongoing U.S. tariff uncertainty. Today's Monetary Policy Report includes three scenarios. A "current view," and two more looking at an escalation or de-escalation. Optimism on inflation: "There are reasons to think that the recent increase in underlying inflation will gradually unwind. The Canadian dollar has appreciated, which reduces import costs. Growth in unit labour costs has moderated, and the economy is in excess supply." "At the same time, tariffs impose new direct costs, which will be gradually passed through to consumers. In the current tariff scenario, upside and downside pressures roughly balance out, so inflation remains close to two per cent." A clear consensus to hold, for now: "There was clear consensus to hold our policy rate unchanged." "If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate." On Canada-U.S. trade war: "Some tariff agreements have been negotiated between the United States and its trading partners, and that has reduced the risk of a severe and escalating global trade war. Unfortunately, the tariffs in those agreements also suggest the United States is not returning to open trade." No normal forecast: "U.S. tariffs are still too unpredictable to be able to provide a single forecast for the Canadian economy." The BoC once again opted against a conventional forecast due to ongoing U.S. tariff uncertainty. Today's Monetary Policy Report includes three scenarios. A "current view," and two more looking at an escalation or de-escalation. Optimism on inflation: "There are reasons to think that the recent increase in underlying inflation will gradually unwind. The Canadian dollar has appreciated, which reduces import costs. Growth in unit labour costs has moderated, and the economy is in excess supply." "At the same time, tariffs impose new direct costs, which will be gradually passed through to consumers. In the current tariff scenario, upside and downside pressures roughly balance out, so inflation remains close to two per cent." A clear consensus to hold, for now: "There was clear consensus to hold our policy rate unchanged." "If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate." Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
