On April 16, 2025, the Bank of Canada decided to maintain its key policy interest rate at 2.75%, marking its first pause after seven consecutive rate cuts since June 2024. Governor Tiff Macklem cited the uncertainty surrounding U.S. trade policies, particularly tariffs, as the primary reason for this decision. The bank expressed its inability to issue regular economic forecasts due to the unpredictable nature of these external factors.
In lieu of standard projections, the Bank of Canada presented two potential economic scenarios:
Scenario One: A successful negotiation leading to the removal of U.S. tariffs, resulting in a temporary economic slowdown followed by moderate recovery and inflation returning to the 2% target.
Scenario Two: A prolonged global trade conflict causing a year-long recession in Canada, with inflation surging to 3.5% by mid-2026.
The bank emphasized its commitment to reacting promptly as clearer data becomes available. Near-term projections indicate significantly weaker GDP growth in the second quarter and a dip in April inflation to 1.5%, attributed to falling oil prices and the removal of carbon taxes.