Bank of Canada holds policy rate at 2¾%

Good morning. I’m pleased to be here with Senior Deputy Governor Carolyn Rogers to discuss today’s monetary policy decision. 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. Second, while US tariffs are disrupting trade, Canada’s economy is showing some resilience so far. Third, inflation is close to our 2% target, but we see evidence of underlying inflation pressures. Today’s interest rate decision is accompanied by our July Monetary Policy Report (MPR). 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. So, we present three scenarios. The first is what we’re calling our current tariff scenario—it presents a view of how growth and inflation would evolve if the trade arrangements currently in place or agreed were to remain. The other two scenarios examine how things could play out if tariffs escalate, or if they de-escalate from where they are now BOC GOVERNOR MACKLEM REPEATS JUNE 4 REMARKS: THERE WAS CLEAR CONSENSUS TO HOLD OUR POLICY RATE UNCHANGED IN TODAY’S DECISION #Canada #interestrates #Macklem

US tariffs are significantly higher than they were at the start of 2025, and US trade policy remains unpredictable. Inflation is near 2%, although underlying price pressures have picked up. With uncertainty about US trade policy still high, the outlook for the Canadian economy remains clouded. The global trade conflict continues to evolve. Since the time of the April Report, extreme trade tensions between the United States and China have receded. The US administration has reached agreements on tariffs with some countries, which have raised US tariffs significantly from January levels. The United States has also doubled its tariffs on imports of steel and aluminum and has threatened high, broad-based tariffs on many other trading partners if agreements are not reached soon. Economic scenarios for the outlook At the beginning of 2025, shifting US trade policy increased uncertainty about the economic outlook. This trade-related uncertainty has two layers. The first layer is around US trade policy. It is difficult to know what tariffs and countermeasures will be imposed, how long tariffs will last and how trade negotiations will play out. The second layer of uncertainty is about how households, businesses and governments will react and adapt to tariffs. In the April Report, the Bank of Canada presented two illustrative scenarios that explored different paths for US trade policy. This was done to address the first layer of uncertainty. To address the second layer of uncertainty, the Risks section focused on how the economy would respond to a given level of tariffs. Since April, the risk of a severe and escalating global trade conflict has diminished, and there is some clarity around what tariffs will look like. Nevertheless, how US trade policy will unfold remains highly uncertain. And while r Bank of Canada monetary policy report does not provide economic forecasts, cites uncertainty generated by US tariffs. Bank Of Canada Governor Tiff Macklem States That The Worldwide Effects Of U.S. Trade Policies Have Been Less Serious Than Expected So Far In BoC's current tariff scenario, GDP grows by about 1% in second half of 2025 and then picks up, hitting 1.8% in 2027. Inflation stays close to 2% over scenario horizon.

On July 30, 2025, Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers answer questions from reporters following the policy rate decision and the release of the Monetary Policy Report.