The Bank of Canada has left its influential overnight interest rate unchanged at current levels as it assesses the impact of U.S. import tariffs on the Canadian economy.
The central bank held its trendsetting policy rate at 2.75% following seven consecutive rate cuts since June of last year. The decision to hold interest rates at current levels comes as the neighboring U.S. continues to shift its tariff policies as they relate to Canada and the wider world.
The pause on interest rates comes as Canada is also in the middle of national elections, with Canadians scheduled to go to the polls on April 28. A drop in Canada’s inflation rate to an annualized 2.3% in March due largely to lower prices for gasoline also enabled the central bank to hit the pause button on rate cuts.
“Considerable Uncertainty”
Bank of Canada Governor Tiff Macklem made clear that the disruption from U.S. trade policies was the main reason for the decision to hold interest rates steady. “The dramatic protectionist shift in U.S. trade policy and the chaotic delivery have increased uncertainty, roiled financial markets, diminished global growth prospects, and raised inflation expectations,” said Macklem at a news conference.
The central bank governor added that “considerable uncertainty” tied to U.S. tariffs still exists. Governor Macklem noted that tariffs have already hurt business and consumer confidence in Canada, with some manufacturers laying off workers. Going forward, the Bank of Canada said it would “proceed carefully” in setting future interest rates.
The next decision on interest rates by the Bank of Canada is scheduled for June 4.
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