The Bank of Canada has held its key interest rate steady at 2.75 percent for the second consecutive time, citing ongoing trade uncertainty and an economy that continues to grow. The decision was in line with financial market expectations, which were influenced by stronger-than-expected economic data.
The bank held its key interest rate in April, pointing to the same trade uncertainty that contributed to its decision on Wednesday. The elimination of the consumer carbon price brought down Canada’s inflation rate in April to 1.7%, but underlying price pressures were firmer. The economy grew at 2.2% in the first quarter, slightly higher than the Bank of Canada forecast, as exports increased ahead of tariffs.
Governor Tiff Macklem said there was “clear consensus” to hold the policy rate, but there was a “diversity of views” on the path ahead for interest rates. He said that members thought there could be a need for a reduction in the policy rate if the economy weakens in the face of continued U.S. tariffs and uncertainty, and cost pressures on inflation are contained.
U.S. President Donald Trump’s erratic trade policy has made the central bank’s job particularly challenging as it tries to maintain price stability while supporting economic growth. The bank is being less forward-looking than usual when it comes to its future rate decisions due to “unusual uncertainty.”
Source: Globe and Mail
Source: The Star
