- Decision
- Lower
- Rate change
- 25 bps
- overnight rate
- 2.75%
The Bank of Canada lowered its overnight rate target by 25 bp to 2.75 percent, setting the Bank Rate at 3.0 percent and the deposit rate at 2.70 percent, citing mounting US tariff threats that are expected to curb first-quarter activity even as headline inflation hovers near the 2 percent goal and Q4-2024 GDP surprised on the upside at 2.6 percent annualised. The step follows January’s 25 bp cut to 3.00 percent, when the central bank also ended quantitative tightening and outlined a gradual restart of asset purchases. Previous easing has fuelled consumption and housing, but fresh survey evidence points to plunging consumer confidence and deferred business investment; employment gains paused in February after earlier strength, leaving the jobless rate at 6.6 percent and wage growth easing. Headline CPI printed 1.9 percent in January and is projected to rise temporarily to about 2.5 percent in March as a GST/HST holiday ends, while the Bank’s core measures remain above 2 percent and near-term inflation expectations have edged higher. Externally, oil prices are volatile and below January MPR assumptions, global equity prices have fallen, bond yields have retreated on softer North American growth prospects, and the Canadian dollar is steady against USD yet weaker versus other currencies. Governing Council warns monetary policy cannot offset a trade war but will scrutinise the interplay of weaker demand and tariff-driven cost pressures and stands ready to act as needed, with the next policy decision due on 16 April 2025.
Rate evolution
From June 2025 to September 2026, the Bank of Canada lowered its target for the overnight rate by 50 basis points to 2.25%, after holding at 2.75% through July 2025, cutting in September and October 2025, and then pausing through September 2026. The initial holds reflected high uncertainty over US tariffs and trade negotiations, while the cuts followed weakening exports and business investment, increased labour market slack and fading core inflation momentum, before the Bank said the overnight rate was about right if inflation stayed near 2% and activity evolved broadly as projected.
It held at 2.25% on June 10 and July 15, 2026, as uncertainty about US trade policy persisted and the conflict in the Middle East kept oil prices elevated, while the economy remained in excess supply even as growth picked up and broadened. On June 10, the Bank looked through a rise in headline inflation to 2.8% in April because core inflation had moved down to around 2% and there was limited evidence of broad-based pass-through, while warning it would not let higher energy prices become persistent inflation. By July 15, it judged the policy rate appropriate to sustain the recovery and return inflation to 2%, noting that second-quarter growth was estimated at 2.5%, consumer spending remained solid and export growth had resumed, while labour market conditions stayed soft and core inflation remained close to 2%. On September 2, the Bank again held the rate as the economy and inflation evolved broadly as forecast, noting that second-quarter gross domestic product rose 3.3% and the recovery broadened but excess supply persisted, while consumer price index inflation hovered around 3% mainly because of gasoline prices and core measures remained close to 2% in July, even as prolonged high oil prices and new tariffs increased upside inflation risks and made growth prospects more uncertain.