The Bank of Canada announced today that it will maintain its policy interest rate at 2.75%. The decision comes amid ongoing uncertainty regarding US tariffs on Canadian goods, as discussions between the two countries continue and US trade policy remains unpredictable.
Governor Tiff Macklem stated, "Today, Governing Council held the policy interest rate at 2.75%. This decision reflects three main considerations. First, uncertainty about US tariffs on Canada is still high. Discussions between Canada and the United States are ongoing, and US policy remains unpredictable."
He added, "Second, while US tariffs are disrupting trade, Canada’s economy is showing some resilience so far." He also noted that inflation is close to the Bank's 2% target but said there is evidence of underlying inflation pressures.
The central bank released its July Monetary Policy Report alongside the rate announcement. Due to persistent unpredictability around US tariffs, the Bank did not provide a single forecast for growth and inflation in this report. Instead, it presented three scenarios: one assuming current tariff arrangements remain in place; another examining an escalation of tariffs; and a third considering de-escalation from current levels.
Macklem explained: "As in April, we have decided not to present a conventional forecast for growth and inflation. US tariffs are still too unpredictable to be able to provide a single forecast for the Canadian economy... These three scenarios are designed to capture the uncertainty about US trade policy."
The Bank has increased its outreach efforts across regions and adjusted surveys for households and businesses in order to better understand how Canadians are adapting to new trade conditions.
"There is also uncertainty about how businesses and individuals in Canada and the United States will adapt to the new trade environment," Macklem said.
Since June, some agreements have been reached between the United States and trading partners that reduce risks of an escalating global trade war. However, these agreements indicate that open trade with the United States may not return soon.
Canada experienced robust economic growth in early 2025 as companies accelerated exports ahead of expected tariffs. However, data suggests contraction in the second quarter due to falling exports to the United States—both because firms had moved shipments forward earlier in anticipation of higher duties and because demand from south of the border weakened under new tariff regimes.
Growth among Canadian businesses and consumers remains restrained by continued uncertainty over future trade conditions with major partners like the United States. Certain sectors affected directly by new American import duties have faced significant challenges since January 2025; however, other parts of Canada's labor market continue expanding even as unemployment has edged up slightly to 6.9%.
According to Macklem: "In our current tariff scenario, growth resumes following the second-quarter contraction... GDP growth is about 1% in the second half of this year as exports stabilize and household spending increases gradually."
On prices, recent changes such as elimination of Canada's carbon tax helped pull headline consumer price index (CPI) inflation below 2%, but indicators suggest underlying price pressures have risen—driven mainly by non-energy goods—with shelter costs still making up much of overall CPI inflation though they are easing somewhat.
"In our current tariff scenario," Macklem said,"upside and downside pressures roughly balance out so inflation remains close to 2%." He added that alternative scenarios show different outcomes if tariffs escalate or decline further.
Businesses facing rising costs from shifting supply chains may pass those expenses onto consumers over time—a factor complicating assessments for monetary policymakers going forward.
"At this rate decision," Macklem concluded,"there was clear consensus to hold our policy rate unchanged... We also agreed that we need to proceed carefully with particular attention to risks... If a weakening economy puts further downward pressure on inflation... there may be a need for a reduction in policy interest rate."
The Governor reiterated his commitment: "We are focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. We will continue to support economic growth while ensuring inflation remains well controlled."