Bank of Canada holds key interest rate at 2.75 per cent
The Bank of Canada (BoC) has announced that it’s holding the key interest rate steady again.
Amid the uncertainty of the current economic climate, BoC held its key interest rate at 2.75 per cent for the third time this year on Wednesday, July 30.
“The Bank of Canada today maintained its target for the overnight rate at 2.75 per cent, with the Bank Rate at three per cent and the deposit rate at 2.70 per cent,” reads the announcement.
The country’s central bank held its key interest rate at 2.75 per cent for the second time in June, in its first update since Prime Minister Mark Carney’s snap election win. The Crown corporation first held the interest rate in April this year amid tariff discussions with the U.S. Before that, BoC made two 0.25 per cent cuts, the most recent one on March 12, which brought the rate down to 2.75 per cent.
The Crown corporation explained its decision, stating, “While some elements of U.S. trade policy have started to become more concrete in recent weeks, trade negotiations are fluid, threats of new sectoral tariffs continue, and U.S. trade actions remain unpredictable.”
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Experts had predicted that the central bank would hold the interest rate for the third time.
Penelope Graham, mortgage expert at Ratehub.ca, told Daily Hive that, factoring in the June inflation and increasing jobs numbers, the BoC had “little rationale to cut rates now.”
“Core inflation measures remain sticky and well above the Bank’s two per cent target. As well, improving consumer and business sentiment in the wake of tariffs indicates a sense of tentative stability,” stated Graham. “This builds the case for the Bank to enter a holding pattern in its neutral range, rather than continue its cutting cycle.”
Although U.S. tariffs have been disruptive, Canada has had a robust first quarter. However, due to a lower demand for Canadian goods, the second quarter likely saw a 1.5 per cent drop in GDP.
“Growth in business and household spending is being restrained by uncertainty,” reads the announcement. “Labour market conditions have weakened in sectors affected by trade, but employment has held up in other parts of the economy.”
Although trade has greatly impacted Canada’s labour market, employment remained steady in other parts of the economy, and the unemployment rate increased to 6.9 per cent in June.
According to Statistics Canada, Consumer Price Index (CPI) inflation rose slightly from 1.7 per cent in May to 1.9 per cent in June.
“High shelter price inflation remains the main contributor to overall inflation, but it continues to ease,” reads the statement.
The BoC opted for an interest rate hold as inflation remains a concern, and Canada’s economy shows signs of resilience. But depending on how the economy and trade changes affect inflation, we could be in for a rate cut in the future.
“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,” it stated.
The next scheduled date for announcing the overnight rate target is Sept. 17, 2025.
With files from Isabelle Docto