Announcement comes after unexpected decline in inflation
The Bank of Canada has decided to leave its policy rate at 2.75 per cent after slashing it by a quarter point in March.
This move comes after StatCan announced yesterday that inflation had eased to 2.3 per cent last month due to lower gas prices and decreased travel into the US.
The announcement reflected a cautionary tone from the central bank as it attempts to find a balance between addressing the growing pressures of US President Donald Trump’s tariff policy on the Canadian economy and an inflation rate that has cooled, though is likely to rise again in the coming months, according to the BoC.
“The major shift in direction of US trade policy and the unpredictability of tariffs have increased uncertainty, diminished prospects for economic growth, and raised inflation expectations,” the April 16 announcement read. “Pervasive uncertainty makes it unusually challenging to project GDP growth and inflation in Canada and globally.”
The BoC says the uncertainty surrounding Trump’s erratic tariff policies have caused Canadian businesses to pause investment, while further losses in the labour market are expected in the coming months. The BoC says Canadian growth could weaken and inflation could remain around the two per cent mark, but also warned a recession with a three per cent or higher inflation rate going into next year is a distinct possibility.
“In Canada, the economy is slowing as tariff announcements and uncertainty pull down consumer and business confidence. Consumption, residential investment and business spending all look to have weakened in the first quarter,” the announcement read. “Trade tensions are also disrupting recovery in the labour market. Employment declined in March and businesses are reporting plans to slow their hiring. Wage growth continues to show signs of moderation.”
