Bank of Canada Interest Rate Decision: BoC Set to Hold Rates at 2.75% Amid Mixed Economic Signals

Bank of Canada Interest Rate Decision: BoC Set to Hold Rates at 2.75% Amid Mixed Economic Signals

Bank of Canada (BoC) is set to release its interest rate decision this afternoon at 4:45PM GMT+3, with the expectations now leaning toward a pause, maintaining the policy rate at 2.75% after 225 basis points of cuts over the past 10 months. If confirmed to be kept at 2.75%, it would be the BoC’s first hold since June  of 2024, this would mark a cautious shift likely following one of the most aggressive easing cycles among major central banks.

BoC rate decision: Balancing Inflation and Growth Concerns

Recently, data has made the rate path less predictable. On the inflation front, February CPI rose to 2.6%, to it’s highest level in the last eight months, which could push the Bank of Canada’s interest rate decision to hold off on further easing for the time being. At the same time, Canada lost 32.6K jobs in March, the first employment decline in the last three years, raising concerns about a potential slowdown.

Adding to the complexity, the consumer spending and business investment have both shown signs of softening,  this is likely pressured by rising borrowing costs and ongoing trade tensions. While inflation remains above the BoC’s 2% target, much of the recent price pressure has likely come from energy and shelter costs, such factors that are more difficult to control through monetary policy. This would leave the central bank walking a fine line between preventing inflation from reaccelerating and avoiding an overtightening that could deepen into a potential recession.

Externally, the market volatility globally has intensified as U.S. President Donald Trump’s tariff moves continue to rattle global trade, likely weakening business confidence and complicating the BoC’s growth outlook.

Looking Ahead: Macklem’s Guidance in Focus

The Bank of Canada is expected to release a range of economic forecasts, rather than a single projection, acknowledging the high degree of uncertainty due to the factors mentioned. A pause would give policymakers time to assess past cuts while keeping room to act if the recession risks increase.

Markets will closely watch Governor Tiff Macklem’s remarks for clues on whether or not the central bank remains open to additional rate cuts later in the year.

BoC’s Inflation Targeting Framework

Bank of Canada operates under an inflation-targeting framework, which aims to keep the headline inflation close to 2%, the midpoint of it’s 1–3% target range. With February’s CPI rising to 2.6%, inflation, meaning it remains above target, potentially limiting the BoC’s flexibility to cut further. 

Some of the Core measures such as the CPI trim and CPI median have also held above the 2% targeted mark, which would signal persistent underlying price pressures. Outlined in the BoC’s Monetary Policy Framework, is maintaining price stability, which remains the central bank’s primary objective.