The Bank of Canada's Governing Council has released an account of their deliberations leading to the monetary policy decision on April 16, 2025. The discussion focused on the elevated uncertainty from the US-led trade conflict, impacting their ability to project economic growth and inflation. Two scenarios, rather than a traditional forecast, were developed to explore plausible outcomes due to the unpredictability of US trade policy.
Governor Tiff Macklem, Senior Deputy Governor Carolyn Rogers, and Deputy Governors Toni Gravelle, Sharon Kozicki, Nicolas Vincent, Rhys Mendes, and Michelle Alexopoulos attended the meetings beginning April 9. The consensus was that recent economic developments showed global economic growth slowing, with inflation easing toward central bank targets. In the United States, growth had slowed modestly, and consumer sentiment worsened following new tariffs imposed on imports.
Financial markets were reacting to larger-than-anticipated tariffs, causing sharp asset repricing. In Canada, the economic outlook indicated a slowdown in both household spending and business investment due to these tariffs and trade policy uncertainties. Despite this, the first-quarter growth was bolstered by stronger exports as US companies built up inventories.
Inflation in Canada was reported at 2.3% in March, with members noting variances due to temporary factors affecting retail prices. Current and future impacts of tariffs on inflation were debated, with short-term expectations rising while long-term expectations remained stable. Governing Council members discussed the impacts of potential US trade policy scenarios, considering the complex layers of uncertainty, particularly related to the tariffs.
Ultimately, the Governing Council decided to maintain the policy interest rate at 2.75%, recognizing the need for clear data and a cautious approach amidst substantial uncertainties. The aim remains to support economic growth while maintaining price stability. Attention will continue on the pressures resulting from tariffs and their economic implications.